GDP stats: Economy grows, but not enough to secure jobs and long-term recovery

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South Africa’s economy grew for the fourth consecutive quarter, expanding 1.2% in the second quarter of 2021. 

But the economy is still 1.4% smaller than it was before the Covid-19 pandemic — which caused it to contract 6.4% last year — and an expansion of 1.2% is not enough to drive sustained growth and employment, analysts say.

According to GDP data released by Statistics South Africa on Tuesday, economic growth was driven mainly by gains in the transport, storage and communication industry, which increased 6.9% in the second quarter.

Other gains were made in the agriculture, forestry and fishing industry (6.2%) and the personal services industry (2.5%); the trade, catering and accommodation industry increased 2.2% and mining  was up 1.9%.

However, there were declines in construction — which decreased 1.4% in the second quarter — as well as manufacturing and finance sector activity. 

The manufacturing industry decreased 0.8% in the second quarter, deducting 0.1 of a percentage point from GDP growth. Six of the 10 manufacturing divisions reported negative growth rates in the second quarter, according to Stats SA.

Finance, real estate and business services decreased 0.4% in the second quarter.

Citibank economist Gina Schoeman said that, at a glance, the second-quarter GDP increase was not robust enough to support long-term economic growth and drive employment. 

According to the most recent figures, South Africa’s unemployment rate stands at a whopping 34.4% as of the second quarter. This is the highest jobless rate on a global list of 82 countries monitored by Bloomberg.

“Sustained growth and employment is both about how much growth you are creating, but also about the composition of that growth,” Schoeman said.

“You need growth to come from sectors, in a sustainable way, that are labour intensive. So for now it helps that mining is still performing … The problem is how sustainable this growth is. Mining, for example, is obviously being driven very well by commodity prices and global trade. 

“But whether that is sustainable, depends on what your view is on that cycle. And also whether South Africa has a firm enough economic outlook so that the profits from that cycle are used to expand businesses down here,” she added.

Stats SA noted in its GDP release that there was increased production reported for platinum group metals, which have experienced a massive uptick in demand amid the commodity cycle.

Momentum economist Sanisha Packirisamy noted that data suggests commodity prices have lost steam in the third quarter. “We had a big sort of push in the second quarter and will probably see in the current account numbers [coming out on Thursday] a record surplus on the back of the trade numbers looking good,” she said.  “And that would be on the back of exports looking good because of what we’ve seen in commodity prices.

“But going forward, and especially going into next year, we expect commodity prices to roll over further.”

It is unlikely jobs will recover at the same pace as GDP growth, especially amid the decline in semi-skilled jobs and in the manufacturing sector, Packirisamy said.

She added that third-quarter growth was likely to be “very soft, if not negative” as a result of stricter Covid-19 lockdown regulations and the looting and unrest that hit Gauteng and Kwa-ZuluNatal in July. “That is going to shave off a significant portion of growth, because the two economic hubs that were affected account for half of the country’s GDP,” she said.

“So I am not convinced that the momentum behind the GDP growth will continue into the third quarter. I think we are going to see a deterioration in the third quarter before slightly picking up in the fourth quarter.”