GDP decreases to 7.6%

After two consecutive quarters of positive growth, real gross domestic product (GDP) decreased by 0.7% in the second quarter of 2022 (Q2: 2022), Statistics South (Stats SA) said on Wednesday.

During this period, the GDP decreased from 7.8% to 7.6%, the agency said.

The period, it said, was characterised by the devastating floods in KwaZulu-Natal and load shedding, weakening an already fragile national economy, which had just recovered to pre-pandemic levels.

Manufacturing biggest drag on GDP

Stats SA said the floods had a negative impact on a number of industries, most notably manufacturing.

“Manufacturing is the largest industry in KwaZulu-Natal, according to 2019 data, accounting for a fifth of national manufacturing production. The damage to factories and plants, and disruptions to logistics and supply chains, pulled national manufacturing output down by 5.9%.

“The biggest drags on growth were petroleum and chemical products, food and beverages, and transport equipment.”

Statistician General Risenga Maluleke said trade, catering and accommodation were negatively impacted by both the floods in KwaZulu-Natal and power cuts across the country.

“The industry recorded a contraction of 1.5%, as floods damaged retail outlets and storage facilities. There was also a loss of trading hours due to load shedding. Mining production was dragged lower by gold, coal and diamonds, with the decrease in coal production caused partly by the flooding. Mining output was also negatively affected by load shedding.

“Economic activity in the electricity, gas and water supply industry was hampered mainly by load shedding due to lack of generation capacity. There were disruptions to water supply too, caused by both the floods in KwaZulu-Natal and drought in Eastern Cape,” he said.

During this period, agriculture, forestry and fishing activity decreased by 7.7%, pulled lower by a decrease in the production of animal products. Electricity outages and the spread of foot-and-mouth disease contributed to the decline.

On the upside, Stats SA said: “The finance, real estate and business services industry made the biggest positive impact on GDP growth in Q2: 2022, rising by 2.4%. Growth was driven by increased activity in the banking sector, as well as in insurance and pension funding.”

Economic recovery from COVID-19: Not all industries are equal

The agency said the economy took almost two years to recover from the impact of COVID-19, with real GDP reaching pre-pandemic levels in Q1: 2022.

“The recovery was short-lived, with the 0.7% decline in Q2: 2022 dragging GDP back below the Q4: 2019 pre-pandemic level of R1 148 billion.

“Six industries have not yet recovered, with construction currently in the worst shape. The construction industry is 24% smaller than it was before the pandemic.

“Mining briefly recovered in Q2: 2021 but has since remained below its Q4: 2019 level.”