South African GDP Growth Quickens as Mining Rebounds
South Africa’s economy, the largest on the continent, expanded at a faster pace in the second quarter as mining output rebounded after 11 months of contracting.
Growth in gross domestic product accelerated to an annualized 3.2 percent from 2.7 percent in the first three months, Pretoria-based Statistics South Africa said today on its website. The median estimate of 18 economists polled by Bloomberg was 3.3 percent. Mining expanded an annualized 31.2 percent in the second quarter after contracting 16.8 percent in the previous three months.
“It was all on this rebound in the mining production,” Kevin Lings, an economist at Stanlib Asset Management, said in an interview from Johannesburg today. “Unfortunately, of course, it’s likely to reverse in the third quarter with the platinum industry now back under pressure.”
Mining output, which accounts for 8.8 percent of the economy, expanded in May and June as platinum mines resumed production after strikes. The boost to growth may be short-lived after workers started a strike at Lonmin Plc (LMI)’s Marikana complex on Aug. 10 and the European debt crisis erodes demand for exports. Manufacturing expanded less than forecast in June and business confidence fell to the lowest level in 12 years in July.
The rand was little changed at 8.4004 a dollar at 12:40 p.m. in Johannesburg from 8.3935 before the data was released. The yield on the 6.75 percent bond due 2021 was down 1 basis point to 6.82 percent.
The Reserve Bank cut the repurchase rate by 50 basis points to 5 percent on July 19, the first move in 20 months, to bolster the economy.
The National Treasury will probably lower its 2.7 percent growth forecast for this year, Finance Minister Pravin Gordhan said this month. The economy needs to expand 7 percent annually through 2020 to create 5 million new jobs and cut the jobless rate to 14 percent from 24.9 percent in the second quarter, according to the government’s estimates.
The strike at Lonmin’s Marikana that has led to 44 deaths this month will probably cut into output again, Lings and Nedbank Group Ltd.’s (NED) chief economist Dennis Dykes said. Impala Platinum Holdings Ltd. (IMP)’s Rustenburg mine was shut for six weeks in the first quarter. South Africa produces about 75 percent of the world’s platinum.
While the overall economic growth figure is “not too bad,” South Africa’s economy is still likely to perform worse in the second half of the year, Dykes said in a phone interview. “The underlying growth rate is not that great,” he said.
Manufacturing, which makes up 15 percent of the economy, contracted an annualized 1 percent in the second quarter compared with a 7.7 percent gain in the previous three months.
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