AMN - Confidence that South Africa will avoid recession this year - comment by Yolanda Torrisi

A recovery in South Africa’s mining and manufacturing sectors will help the country avoid a recession this year. The country’s Central Bank has predicted that a lift in growth in these two sectors in the last three quarters of this year will assist the country greatly.

Growth in South Africa contracted 1.2% in the first quarter this year due to a sharp contraction in the mining, manufacturing and agricultural sectors but despite the Central Bank recently cutting its growth forecast to zero, there is confidence the country will escape a recession.

Deputy Governor Daniel Mminele is quoted on the Central Bank’s website saying: "The SARB does not believe that a contraction in the second quarter is likely. In order to achieve a growth rate of zero per cent, the economy will need to grow by between 0.8 and 1.0 per cent in each of the three remaining quarters."

In its July review of the economy, the South African Reserve Bank (SARB) kept its benchmark interest rate on hold saying a weak economy had persuaded it to pause a hiking cycle.

Daniel Mminele says that positive economic data for the second quarter in the mining and manufacturing sectors, coupled with a fall in inflation and lower global oil prices should vindicate the SARB's decision.

Manufacturing output rose more than expected during May, while mining contracted at a slower rate in the same month.

The UK exit from the European Union will significantly affect South Africa whose financial sector has very close links with the UK. "South Africa's trade links are relatively small, but could suffer the most, given its strong investment and financial links with the UK," says Daniel Mminele.

He said that foreign direct investment was likely to be hit further by the UK European exit on the back of data showing that FDI inflows to South Africa are already on the decline, falling to 9.9bn rand (US$690 million) in the first quarter from 22.6 billion in the final quarter of 2015.

- Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com