South Africa, Africa’s second-largest economy and the most advanced economy in the continent is now officially in recession.
Official data from Statistics South Africa, the country’s authorized data agency shows that South Africa’s economy has contracted for the second consecutive time. For the first quarter, fell by 0.7% led by weak manufacturing and trade sector.
South Africa has since been in a stagnant economy, but more trouble started in the last three three months of 2016 when Statistics South Africa said the economy shrank by 0.3%.
Confirming the data, Statistics South Africa Deputy Director General Joe de Beer said, “We can now pronounce that the economy is in a recession”.
He added that “The major industries that contracted in the economy were the trade and manufacturing sectors.”
However, analysts said the signs of a recession was evident in the management of the economy and a lack of confidence for the political side of things. The sacking of Pravin Gordhan, a respected Finance Minister, and a sudden cabinet shakeup led to the downgrade of the country’s sovereign debt ratings by both Fitch and S&P Ratings who have since downgraded South Africa to junk status.
Moody’s Investors Services, another major rating agency is waiting on the sideline to downgrade the country. Its Baa2 rating is merely two notches above junk. The news of an official declaration of the recession means Moody’s might change its opinion on South Africa’s creditworthiness.
Nigeria’s Africa’s largest economy is expected to exit recession by the end of the second quarter. However, things are still fragile as consumer prices, especially food and essential services have since skyrocketed. South Africa’s recession is also a bad news for Nigeria giving the fact that many South African companies have serious holdings in Nigeria. Two major economies in a recession is a ‘tragedy’ for companies who see both markets as their major hubs.
(PageOneNg)
