Citadel chief economist Maarten Ackerman has encouraged South Africans to brace themselves for a challenging economic period as economic growth continues to be muted.
Ackerman’s comments came in light of Stats SA’s latest data which showed that the South African economy had grown by 0.6% in Q2 2023.
While this was higher than expected, Ackerman said the rand billion number for South Africa’s GDP in Q2 is “in fact still very close to where the country was in mid-2022”.
“The country’s economy was R1.161 billion strong in the third quarter of last year versus R1.160 billion now,” he said.
“Also, considering that we’ve seen almost no growth since South Africa’s pre-Covid levels, the country has seen very flat GDP growth over the past few years, mainly due to the structural challenges it is facing.”
He said South Africa’s growth is mainly hampered by structural challenges and cited load-shedding as one of the country’s key challenges.
“We need to remember that we won’t grow this economy if we don’t rebuild its infrastructure first,” he said.
However, he said ongoing load-shedding means the construction industry is still underwater, “which is a great pity because construction is an important job creation sector in the economy”.
In addition, Ackerman said the GDP data clearly shows South African consumers are under pressure.
“Consumer spending is typically a positive sector for the economy, but in the past quarter, we saw a 0.3% decline in household spending,” he explained.
In Q2, households still spent on services but declined on durable, semi-durable and non-durable goods.
Ackerman said this is an indication of the headwinds that consumers are facing.
“If you look at the areas where they spent, such as restaurants and hotels, which showed a marked 4.1% growth in spending, you could argue that this was due to load-shedding, which forced consumers to look for alternatives when they could not eat at home.”
He encouraged consumers to brace for a tough economic period ahead, as he predicts that in the next 12 to 18 months, South Africa might see growth coming down and settling at about 1.5% or 1.16% for 2023.
“Things will most likely get tougher for consumers, as the world faces further economic stress, load-shedding continues, and the job market takes further strain.”
“Overall, South Africa’s economic growth looks slightly better than expected. However, due to the structural issues we face as a country, we have not achieved the sustainable numbers required for job creation.”