Cape Town – Statistics South Africa announced that South Africa was in a technical recession. This recession was caused by a further 0.7% decrease in Gross Domestic Product in the second quarter of the year, while a 2.6% decline was experienced in the first quarter.
Stats SA said that the contraction was caused by a decline in activity in agriculture, transport, and trade.
Enoch Godongwana, head of economic development for the ANC, says that the decline in economic growth can be attributed to the lack of efficient management under Jacob Zuma’s tenure. The instability of the finance ministry and the consequences of SARS’s mismanagement has had a great toll on the country. Other senior members of the party have reported that it is important that the necessary macroeconomic policies are put in place to recover from the recession.
Economist John Muscat says that the situation will put pressure on retailers as the currency is depreciating and oil prices are increasing. The cost of water and electricity is also increasing. Thus, consumers will have less disposable income and will reduce their spending. Muscat forecasts that an increase in taxes will occur in order to reduce the current deficit, further decreasing disposable income.
Other economists reported that the recession should not have been surprising as the economic activity has been weak. They advise that the government should look into limiting expenditure. Economists suggest that the rise in the price of fuel should be reduced and the government should temporarily steer away from assisting state-owned enterprises.
At the Forum on China-Africa Cooperation in Beijing, Finance Minister Nhlanhla Nene admits that they did not expect the recession. He assured attendees that the government was working on structural reform to recover from the recession. He says that there are many conferences ahead whereby viable solutions can be reached. Nene says that citizens have no need to panic as the government has a plan to deal with the recession.
President Cyril Ramaphosa says that the recession is a phase of transition. He says South Africans should not be worried about the technical recession. He said that now was the time for stakeholders to cooperate and come up with ways to ensure cash is injected into the South African economy.
Multinational investment banking company Goldman Sachs has reported that there is an expected 0.8% growth for the year that could relieve the effects of the decline in economic growth.