South African economy rebounds in Q3 2020 after pandemic crash

South Africa’s economy bounced back strongly in the 3rd quarter from a slump inflicted by the coronavirus pandemic, official data showed on Tuesday, December 8.

Gross domestic product (GDP) in Africa’s 2nd largest economy expanded 13.5% quarter-on-quarter in July-September, “largely as a result of the easing of COVID-19 lockdown restrictions,” statistics agency StatsSA said in a statement.

The previous 3 months had brought a 16.6% contraction.

In annualized terms, the statistics agency’s preferred measure, 3rd quarter growth reached 66.1%, after falling back by 51.7% in April-June.

To this day, South Africa accounts for the most coronavirus cases of any African country, with almost 820,000 confirmed infections out of 2.3 million.

Leaders imposed a strict lockdown on March 27, aimed at controlling the virus’ spread but which also hobbled the economy.

The government started to gradually loosen restrictions as new infections slowed during the 3rd quarter, allowing economic activity to start picking back up.

Manufacturing, trade, and mining were “the biggest drivers of growth in the 3rd quarter,” the statisticians said, contributing 16.2, 14.6, and 11.8 percentage points respectively to GDP growth.

“Despite the rebound, the economy is still 5.8% smaller than it was at the end of 2019,” StatSA added.

The 3rd quarter bounce came in more powerful than had been predicted by analysts, who projected an annualized increase in the mid-50s.

Bumper growth in the 3 months was “clearly a base-effect bounce” appearing larger because of the sharp contraction immediately before, Peregrine Treasury Solutions said in a note.

But that didn’t stop the figures being “well received by the market,” the analysts added.

The country’s rand currency strengthened 0.75% on Tuesday.

But the continent’s most industrialized economy still has a long way to clamber back before attaining pre-pandemic production levels.

Analysts expect it to take around 5 years for economic activity to fully recover.

“It’s a strong rebound in the 3rd quarter but the economy is still weak, it’s no way close to pre-COVID levels,” Mpho Molopyane, economist at Rand Merchant Bank, told Agence France-Presse.

The “outlook is still [for] a subdued growth due to long and existing structural constraints such as electricity,” she added.

South Africa’s economy was already in recession – its second in two years – before it was hit by the virus, and had shrunk by 0.4% quarter-on-quarter during the first 3 months of 2020.

The latest figures have technically propelled South Africa out of recession, defined as two successive quarters of shrinkage.

“If you look at it from seasonal-adjusted and annualized data, yes it points to positive economic activity in the 3rd quarter,” said Molopyane.

Nevertheless, “on a year-on-year basis, the economy still contracted,” he pointed out. – Rappler.com