Categories: Business NewsNews
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2023-11-29 9:07 AM

South Africa’s Q3 Economic Report Reveals Struggling Industrial Performance

  • Economic Contraction: Various sectors, including industrial production, manufacturing, and construction, experienced contractions, contributing to a weakened economic performance in South Africa in Q3 2023.
  • Sectoral Challenges: Industries like manufacturing, mining, and wholesale trade faced significant downturns, with specific sectors such as real estate, civil construction, and tourism exhibiting dissatisfaction and declining confidence in prevailing business conditions.
  • Growth Projections: Despite some sectors showing resilience, the overall economic growth forecast for 2023 remains bleak, with projections estimating a modest 0.5% year-on-year growth, highlighting the persistent challenges in fostering substantial economic recovery.
By Miriam Matoma

In the most recent quarterly report on industrial and manufacturing production in South Africa, disheartening statistics paint a picture of economic vulnerability in the third quarter of 2023. Despite various sectors’ contributions, there’s a prevailing sentiment of stagnation and limited improvement across businesses.

Industrial production notably contracted by 1.2% in Q3.23 qqsa (quarter-on-quarter, seasonally adjusted), representing approximately 19.7% of the country’s real GDP. This sector encompasses manufacturing, mining, and electricity production, forming the backbone of economic activity.

Annabel Bishop, Investec’s chief economist, highlighted that this contraction significantly affects the country’s Q3 GDP outcome, aligning closely with the GDP headline figure. Manufacturing production shrunk by 1.2% qqsa, while building completions within the construction sector experienced a substantial 20.8% contraction qqsa. In contrast, electricity production managed a modest rise of 0.3% qqsa.

Bishop emphasized the year-on-year perspective, noting a substantial 4.3% decline in manufacturing production, attributing this to the fading base effects from the KwaZulu Natal floods that had artificially inflated growth rates from April to August.

Examining the primary sector of GDP, mining and agricultural production constitute its essence. Mining contracted by 1.5% qqsa in Q3.23, with a significant 35% weight in the industrial production index. Meanwhile, although aggregated data for the agricultural sector isn’t available, Bishop mentioned a positive outlook for wheat production, albeit cautioning about the sector’s volatility, contributing only 3.2% to GDP.

Within the tertiary sector, wholesale trade sales slumped by 0.6% qqsa, while vehicle sales witnessed a 1.9% q/q decline. However, retail trade sales managed to inch up by 0.8% qqsa, providing a slight offset to the overall contractions.

However, the Bureau for Economic Research’s survey revealed concerning sentiments in various tertiary sectors, including dissatisfaction with prevailing business conditions. Tourism accommodation showed a meager 1.4% qqsa rise, whereas other sectors fared notably poorer.

The real estate sector witnessed dwindling confidence, mirrored by dissatisfaction in the civil construction industry, while building confidence continued to remain weak.

Bishop projected a grim outlook, forecasting an overall growth rate for 2023 at a mere 0.5% y/y based on the available Q3 data. Despite some sectors showing slight resilience, the overarching narrative is one of an economy struggling to gain momentum.

The concerning statistics indicate a challenging landscape for South Africa’s economic recovery. With the persistent underperformance in various key sectors, sustained efforts and strategic interventions are imperative to foster growth and stability.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam