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SA economy enters recession

MBONGENI MGUNI
Ramaphosa, RSA president
The South African economy is technically in recession, a state of affairs that carries mixed implications for Botswana's economy.

Statistics SA, that country’s data agency, released figures this morning showing South Africa’s economy shrank by 1.4 percent in the fourth quarter of 2019 after a 0.8 percent reduction in the third quarter. By Stats SA definitions, a recession is said to have taken place when the economy experiences negative growth over two successive quarters.

For the full year 2019, the South African economy grew only by 0.2 percent in real terms, compared to 0.8 percent growth for 2018. 

Botswana is due to release its own fourth quarter 2019 GDP figures on March 31, following real growth of 3.1 percent in the third quarter due largely to a slowdown in the mining sector.

Lower growth in South Africa is associated with declines in the regional economies closely associated with Southern African powerhouse. For Botswana, Namibia, Lesotho and Swaziland, which are members of the Southern African Customs Union with South Africa, a recession in South Africa suggests a lower shared revenue pool as a result of reduced economic activity in that country.

Traditionally, South Africa is by far the biggest contributor to the shared revenue pool, reaching as high as 97% contribution. For 2018-2019, the pool distributed P71 billion,

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with South Africa receiving P32 billion and Botswana R14 billion. For the current financial year, Botswana expects about P14 billion, and approximately P15.4 billion in the 2020-2021 year starting on April 1, representing nearly 25% of the total revenue budget.

Econsult managing director, Keith Jefferis said the major issue was not so much the marginal negative percentages of growth on a quarter by quarter basis, but the fact that South Africa’s economy was far below the rates of growth it needed to be at. 

“The South African economy needs to be growing at between four to six percent annually and it is not.

“The most immediate impact of the recession we can see will be on some of our firms that export. When that economy is not growing, it makes it more difficult for our firms exporting there,” he told Mmegi.

Analysts told Mmegi that the recession in South Africa also pointed to stable to low imported inflation for Botswana, which relies on the regional powerhouse for most of its imports. The lower confidence in the rand as a result of the recession is also expected to weaken its standing against the pula, analysts said.



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