Hugo Pienaar, chief economist at the Minerals Council SA, said South Africa’s GDP growth for 2023 will likely be 0.5%, down from real GDP growth of 1.9% in 2022.
Pienaar’s prediction followed the latest data from StatsSA, revealing that South Africa’s GDP decreased by 0.2% in the third quarter of 2023.
With increased load-shedding and problems with South Africa’s railways and ports, many economists predicted the country would collapse into a technical recession.
Stanlib chief economist Kevin Lings said the country’s GDP was “hurt by a decline in agriculture, mining, manufacturing, construction and retail”.
“South Africa can experience a technical recession given the recent increase in electricity outages, high interest rates, and problems with port and rail capacity,” he said.
Old Mutual’s chief economist, Johann Els, concurred, saying the country will likely slide into a technical recession at the end of 2023.
“South Africa may be heading into a technical recession with weak growth as the fourth quarter will also slip into negative growth,” Els said.
He is particularly concerned about the volatility of the mining, manufacturing, and agricultural sectors, which have an outsized impact on the country’s overall GDP.
Pienaar highlighted that Transnet’s rail failure means Kumba has built up 2 million tonnes of iron ore stocks.
This amounts to R5.1 billion at the current rand price of iron ore. Kumba will now cut back on production and sell out of or work down stocks.
He added that some retailers would likely have to sell festive season merchandise out of their inventories as goods are clogged up at Durban harbour.
“This means that after a large third-quarter decline, country-wide inventories could fall again in the fourth quarter, weighing on real GDP,” he said.
Pienaar added that before the weaker-than-expected Q3 real GDP release and a slight downward adjustment to Q2, growth of 0.8% looked on the cards for 2023.
“However, a GDP growth figure of 0.5% now seems more realistic, down from real GDP growth of 1.9% in 2022,” he said.
“It remains remarkable, albeit understandable given constraints and low confidence, how weak private capex remains.”
“Excluding machinery and equipment, which is supported by green energy investment boom, real level of private capex in Q3 was 19.9% down on the fourth quarter of 2019.”