South Africa has gone into recession after its economy shrank by 0.8 per cent in the second quarter of the year. A recession is technically defined as when an economy contracts over two consecutive quarters.
The main reasons behind the contraction in the second quarter were slowing agriculture, transport and trade sectors, according to Statistics South Africa. In particular, the agriculture market fell back by 29.2 per cent, taking 0.8 per cent off GDP.
The rand was down 1.5 per cent against the dollar on Wednesday, with $1 buying 15.6 rand, and the South African currency was also down 1.2 per cent against sterling, with £1 buying almost 20 rand. The weakened rand pulled South African stocks down on Tuesday.
Jeffrey Schultz, senior economist at BNP Paribas, added: “There is no way to sugar-coat the numbers, the growth picture in the first half of 2018 is ugly and it shows in this economy that there is broad-based weakness across the primary and tertiary sectors of the economy.”
“The economy remains lacklustre, partially driven by policy uncertainty. Investment in manufacturing and development has been hampered by uncertainty regarding the mining charter and land redistribution,” said Bianca Botes, an analyst at Peregrine Solutions.
George Glynos, head of research at ETM Analytics, said the recession was a result of years of poor administration, and added: “Clearly this is not what President Ramaphosa would like running into the elections next year.”
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