South Africa: strong end to 2020, but weak start to 2021 - Capital Economics
Africa Economics

South Africa: strong end to 2020, but weak start to 2021

Africa Economics Update
Written by Virag Forizs

The upside surprise in South Africa’s mining and manufacturing output in December is unlikely to be repeated in early 2021. Tighter virus containment measures and continued power cuts probably mean that the pace of the recovery has slowed.

  • The upside surprise in South Africa’s mining and manufacturing output in December is unlikely to be repeated in early 2021. Tighter virus containment measures and continued power cuts probably mean that the pace of the recovery has slowed.
  • Activity data published by Stats SA today showed that manufacturing production rose by 1.8% y/y following a 4.1% y/y contraction in November. (See Chart 1.) And figures released earlier today showed that, compared to a fall of 9.4% y/y in November, mining output increased by 0.1% y/y. (See Chart 2.) The outturns were above the most optimistic estimates collected by Bloomberg (of a 1.3% y/y and a 2.5% fall in manufacturing and mining production, respectively).
  • Industrial activity perked up at the end of 2020 despite a worsening local COVID-19 outbreak at the time. The sharp rise in new cases (see Chart 3) prompted the government to impose tighter restrictions at the end of the month, although these are unlikely to have had much effect on activity in December. We suspect that the bounce back in manufacturing and mining output was supported by a rebound in external demand as vaccination campaigns got underway in South Africa’s key trading partners.
  • The containment measures imposed to curb South Africa’s second wave probably weighed on activity at the start of 2021, more than offsetting external support. More recent survey data for the manufacturing sector were not as encouraging as the headlines might suggest. And persistent power outages (see Chart 4) have almost certainly dampened activity too.
  • One crumb of comfort is that the country has passed the peak of its second wave of COVID-19. (See Chart 3 again.) The authorities relaxed restrictions a touch at the start of February, but containment measures are unlikely to be eased drastically as the government struggles to roll-out vaccines. The economic backdrop for President Cyril Ramaphosa’s State of the Nation Address today is far from rosy and plans to impose harsh fiscal austerity to shore up weak public finances mean that the outlook is weak.

Chart 1: Manufacturing Production

Chart 2: Mining Production

Chart 3: South Africa COVID-19 Cases

Chart 4: Energy Availability Factor

Sources: Stats SA, Eskom, Johns Hopkins, Refinitiv, Capital Economics


Virág Fórizs, Africa Economist, virag.forizs@capitaleconomics.com