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For the first time in five years South Africa’s economy has shrunk, putting tens of thousands of jobs on the line.
The gross domestic product for the first quarter of 2014 declined by 0.6% at a quarter-on-quarter annualised rate, Stats SA said yesterday.
Mining and manufacturing were largely responsible for the negative growth. The mining sector contracted by nearly 25% – the worst performance in 37 years – while manufacturing’s contribution dipped by 4.4%.
The Association of Mineworkers and Construction Union’s strike on the platinum belt has severely hampered operations at Anglo Platinum, Impala and Lonmin mines.
Workers downed tools more than four months ago.
“The figure is very bad. South Africa could already be in a recession and it’s highly unlikely that the number will improve in the second quarter,” said Mike Schüssler of Economists.co.za.
“The platinum strike has had a big impact and production doesn’t look set to improve any time soon,” he said.
The statistics measure economic activity in the first quarter but Amcu members have not returned to work and are still demanding a R12500 a month salary for entry-level workers by 2017, excluding allowances.
This means the platinum mines have been lying idle in the second quarter, for nearly as long as in the first quarter.
Even if the strike were to end today, the mining companies would only be able to restart operations in the second half of the year.
The economy has its foot on the brakes, according to the Reserve Bank’s leading indicator.
The indicator – which pulls together data from job adverts, business confidence, car sales and money supply to get an idea of the direction the economy is headed – decreased by 0.5%.
Two consecutive quarters of the GDP contracting is considered a recession by economists.
In the 2008-2009 recession, about a million jobs were lost in South Africa.
First National Bank household analyst John Loos expects the economy to shed many jobs this year.
Loos still forecasts GDP growth of about 2% for the full year. But even at those levels, he sees 0.7% fewer people employed by the end of 2014.
That means that as many as 100000 jobs could be lost.
Nedbank’s economists said yesterday that the outlook for the rest of the year “remains clouded by the ongoing strike in the platinum mining industry and the potential spillover effects of lost wages on confidence and household spending”.
Production is also highly unlikely to rebound strongly in the second quarter, Nedbank said.
By yesterday, the wages lost by striking workers were approaching R9-billion which, coupled with rising inflation, will drag down domestic spending.
“Once the strike is resolved, the economy should start to recover, helped by stronger global demand, a weaker rand and increased infrastructure spending,” said Nedbank.
The SA Chamber of Commerce and Industry said the GDP contraction was “a clear call for the new government to turn its attention immediately to the economy and urgently convene with business and labour”.
Source – Timelive