South Africa stumbles into a recession

Immigrants netted at Yuji Island Majoreni Shimoni./FILE

Immigrants netted at Yuji Island Majoreni Shimoni./FILE

A recession is widely defined as two or more consecutive quarters of contraction.

Statistics South Africa said the economy contracted by 0.7 percent quarter-on-quarter, led by declines in the agricultural, transport and retail sectors.

"This economy remains in the doldrums, that we are in desperate need for policy certainty and structural reform to get us onto a growth path", Elize Kruger, an economist at Paarl, South Africa-based NKC African Economics, told Bloomberg.

According to Statistics South Africa, agricultural production declined by 29.2 percent, while the transport, communication and storage sector dropped 4.9 percent.

"The trade, catering and accommodation industry decreased by 1.9% and contributed -0,3 of a percentage point to GDP growth".

The rand stretched losses against the dollar to more than 2 percent and government bonds fell after the data was released.

Although economists had hoped for an improved second quarter, which would have meant that the nation would have escaped a technical recession, the second quarter of 2018 shrank by 0.7% quarter-on-quarter.

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"The mining and quarrying industry increased by 4.9% and contributed 0,4 of a percentage point to GDP growth".

After a revised 2.6 percent contraction in the first quarter, the latest data piled pressure on Ramaphosa who has promised a "new dawn" after his predecessor Jacob Zuma's scandal-tainted nine-year reign.

The rand lost value because of spillover from emerging market jitters in Turkey and Argentina.

Growth was dragged lower by five of the ten sectors of the economy, underscoring just how broad-based the weakness is.

It is the first time since 2009 that the South African economy, the second largest in Africa after Nigeria, will be going into recession. "Of course, it's okay for people to be concerned, which is a good sign but I think it's also going to call on all of us to work together to lift the country out of this".

This is coming barely six months since the current president, Cyril Ramaphosa, took over power.

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