Stats SA released another set of extremely poor GDP figures for the 3rd quarter of the year, as the economy struggles to recover off the record lows of 2020, failing to get back anywhere near to 2019 pre-Covid levels. The economy contracted by 1.5 percent in the 3rd quarter relative to the 2nd quarter, with most sectors seeing decline. This comes as the 3rd quarter was characterised by a lockdown costing the economy billions, the unrest in July, in both Gauteng and KwaZulu Natal, as well as a spat of load shedding, which continues to further put a handbrake on an already ailing economy. Not to mention the lack of a fiscal safety net in response to the pandemic, as well as a serious lack of structural reforms.
Surprisingly, the agricultural sector saw the worst figures in the 3rd quarter, with production down by 13.6 percent relative to the previous quarter. Wholesale and retail trade activity was down by 5.5 percent, which would have been affected by the lockdown, while the manufacturing industry saw 4.2 percent less production, which is also quite bad. The only real positive in the quarter was the finance sector, which grew by 1.2 percent, but was not enough to lift the overall figures out of the red.
The construction industry was flat in the 3rd quarter compared to the 2nd quarter, with a contraction of just 0.4 percent. This is off the back of a 1.4 percent decline in the previous quarter. If we look at the investment in construction figures, they are also relatively flat in the 3rd quarter, with investment in the residential industry up by 2.2 percent, while the non-residential industry saw growth of just 0.1 percent. The civil sector saw investment increase by 1.3 percent. It is important to note that investment in the construction industry (and investment and GDP nationally) is nowhere near pre-Covid 19 levels. If we compare construction 3rd quarter figures this year to the same quarter in 2019, investment is down by 18.4 percent overall, which is quite staggering. Moreover, investment averaged R244 billion in the 3 quarters this year, compared to R309 billion in the same 3 quarters in 2019, so a loss of almost R75 billion. This comes as tender activity is improving, but no real headway is being made on average, in terms of those tenders being awarded in any sort of timely manner.
With the South African economy firmly headed for a 4th wave of the Covid-19 virus, as well as Omicron related travel restrictions, our worst fears have been realised with regards to the economic outlook for the 4th quarter of 2021 and first quarter of 2022, with high likelihood of further restrictions on economic activity in the festive season, further curtailing economic activity. The vaccination drive remains a disaster, and as the vast majority of South Africans remain unvaccinated, this further gives scope for the virus to mutate. What is encouraging is that early data is showing that although the Omicron variant seems much more transmissible than the Delta variant, it does seem to be relatively mild so far. Whether or not this will stop politicians implementing further restrictions remains to be seen.
