South Africa’s recovery lagging behind - Capital Economics
Africa Economics

South Africa’s recovery lagging behind

Africa Economics Update
Written by Virag Forizs

Hard activity data from South Africa released this week point to continued weakness in the economic recovery in August despite the easing of containment measures.

  • Hard activity data from South Africa released this week point to continued weakness in the economic recovery in August despite the easing of containment measures.
  • Activity data published by Stats SA today showed that retail sales rose by 4.0% m/m in August, a stronger outturn than even the most optimistic forecast collected by Bloomberg (of 3.0% m/m). Figures released earlier in the week showed that mining and manufacturing output recovered at a slower pace in August compared to July, increasing by 6.8% m/m and 3.6% m/m respectively.
  • Even as activity continued to recoup its losses from Q2, output in August remained depressed. Manufacturing production was down 10.8% y/y in the middle of Q3. (See Chart 1.) And mining output and retail sales were 3.0-4.5% lower than in August 2019. (See Charts 2 & 3.) It seems that loosening containment measures, from lockdown level three down to two in mid-August, did not result in a significant boost to activity.
  • Overall, the figures suggest that GDP expanded by around 24% q/q on a seasonally adjusted, annualised basis in August. Following a 51% q/q saar contraction in Q2, that would be far from a robust recovery in output. And more timely survey data do not point to a strong September either. Car sales were still down by 31.2% y/y last month. (See Chart 4.) And the South African Chamber of Commerce and Industry’s measure of business confidence dropped back in September.
  • A string of data releases suggesting a weak rebound in activity will probably strengthen the arguments of those in the cabinet advocating for a more ambitious recovery plan and/ or less harsh austerity in the coming years. We’ll know more when President Cyril Ramaphosa unveils the economic recovery plan later this week, and Finance Minister Tito Mboweni presents a budget update towards the end of October.

Chart 1: Manufacturing Production (% y/y)

Chart 2: Mining Production (% y/y)

Chart 3: Retail Sales (% y/y)

Chart 4: Car Sales (% y/y)

Sources: Stats SA, Refinitiv, Capital Economics


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