The SA Chamber of Commerce and Industry (Sacci) on Tuesday expressed concern about South Africa’s shrinking economy.
According to Statistics South Africa, the economy contracted by 0.6 percent in the first three months of the year.
Sacci said the decline was largely due to the protracted strike in the platinum sector.
“The severity of the economic impact of the strike questions whether South Africa’s labour relations framework is serving the needs of workers, business owners, and the country’s development goals,” Sacci CEO Neren Rau said in a statement.
“South Africa urgently requires open debate on ending and preventing similar debilitating strikes.”
The chamber was equally concerned about the threat of strike action in the sugar industry, which is also an important source of export revenue.
“The economic contraction is a clear call for the new government to turn its attention immediately to the economy and urgently convene with business and labour to ensure that the next five-year-term offers substantial economic improvement compared to the last five years,” he said.
Investec also expressed worry over the growth trends.
“Over the past few years South Africa’s economic growth has been deteriorating substantially, and GDP growth is at risk of approaching the one percent year-on-year mark this year after recording 1.9 percent in 2013, 2.5 percent in 2012, and 3.6 percent in 2011,” Investec’s Annabel Bishop said.
“Strike action and reduced supply of electricity has slowed production, while real household consumption expenditure growth has deteriorated on weakened financial health, waning demand, and flagging manufacturing production.”
The SA Reserve Bank’s decision to hike its key lending rate by 50 basis points to 5.5 percent was seen as a contributing factor to the weak economic growth in the first quarter of the year.
“The wholesale, retail, motor trade, accommodation, and catering sector recorded weak growth of 2.2 percent year-on-year, and is at risk of slowing further, should additional interest rate hikes occur this year,” Bishop said.
“The optimal outcome would be no further rise in interest rates in 2014 as inflation is likely to be within target in 2015, and the Reserve Bank cannot influence the 2014 CPI [Consumer Price Index] outcome given the time lags involved between changes in interest rates and the impact on inflation.”
Earlier on Tuesday, Stats SA said the main contributors to the decrease in economic activity in the first three months of 2014 were the mining and quarrying industry (-1.3 percentage points) and the manufacturing industry (-0.7 of a percentage point).
Positive contributions by other industries included finance, real estate, and business services (0.4 of a percentage point), the wholesale, retail, and motor trade, catering and accommodation industry (0.3 of a percentage point), and the transport, storage, and communication industry and general government services (each contributing 0.2 of a percentage point).
Stats SA listed the most notable performances of industries in the first quarter of the year compared with the first quarter of 2013 as:
– The construction industry increased by 4.9 percent;
– The manufacturing industry increased by 2.4 percent;
– The wholesale, retail, and motor trade, catering and accommodation industry increased by 2.2 percent;
– Finance, real estate, and business services increased by 2 percent;
– The mining and quarrying industry decreased by 2.5 percent; and
– The agriculture, forestry, and fishing industry decreased by 1.6 percent.
GDP was estimated at R874 billion for quarter one of 2014 – R2bn less than the previous quarter.
Finance, real estate and business services grew by R7bn to R172bn, while agriculture, forestry, and fishing expanded by R6bn to R15bn.
Construction also showed upwards growth to R31bn – R4bn up from the last quarter.
Wholesale, retail and motor trade, catering and accommodation was the worst off, contracting by R16bn to R127bn.
Mining and quarrying declined by R6bn to R67bn. – Sapa