South Africa’s steel and metal sector has pleaded with President Cyril Ramaphosa to show bold leadership in place of “soothing words” after Stats SA reported a shock 3.2% fall in the country’s quarterly GDP on Tuesday morning.
While analysts were expecting a contraction in economic growth, the scale of the decrease was unexpected and about twice what some analysts had predicted. The rand plunged over 1% against the dollar in wake of the announcement.
Kaizer Nyatsumba, the head of the Steel and Engineering Industries Federation of Southern Africa (Seifsa), said in a statement that SA was confronting a “growing economic crisis, which has the potential to get completely out of control”.
Seifsa is an employer federation representing the country’s metal and engineering industry.
“Tough leadership, as opposed to tepid leadership and mere rhetoric, is called for,” said Nyatsumba.
The manufacturing sector – vital for Seifsa’s members – declined by 8.8% in the first three months of the year.
The construction industry, meanwhile declined by 2.2%. Construction has only experienced a single quarter of positive growth over the last two years, which has contributed to major players such as Group 5 filing for bankruptcy. The industry shed 142 000 jobs in the first quarter of 2019 when compared with the fourth quarter of 2018, Stats SA reported.
“President Ramaphosa has now obtained a mandate from the electorate; he and his team can no longer continue to fiddle while the country burns,” said Nyatsumba. “We are currently confronting a growing economic crisis, which has the potential to get completely out of control. Tough leadership, as opposed to tepid leadership and mere rhetoric, is called for.’
Jameel Ahmad, the global head of currency strategy and market research at FXTM, described the decline in growth as “alarming”.
Ahmad said South Africa should not expect an uptick in global growth rates to help boost SA’ economic growth, as persistent trade tensions between the world’s largest economies were more likely to continue causing headaches for emerging markets like South Africa. He advised the SA Reserve Bank to cut interest rates.
Reza Hendrickse of PPS Investments, meanwhile, said in a note to clients that there appeared to be little chance that SA’s stop-start growth profile will improve, adding to was getting difficult to see how SA could reach 1% annual growth.
‘No time for a honeymoon’
Labour federation Cosatu said in a statement on Tuesday afternoon that the decline in growth was no surprise because “nothing drastic [has] been done to kick-start the economy”.
“The country is reaping the rewards of National Treasury’s dogmatic adherence to the neo-liberal capitalist trajectory of the late 20th century,” the statement said. “It is now clear that [these policies] based on ‘market forces’ and international competitiveness are not going to solve our economic problems. These policies have seen more and more people sliding into poverty in this country.”
The federation also expressed concern over unemployment rates, saying there was “no time for a honeymoon” as the new ministers of trade and industry and employment and labour took the reins.
In May, the Reserve Bank cut its SA economic growth projection to 1% from 1.3%. PwC, in a statement, noted that, at 1%, GDP growth would again be lower than population growth. “In other words, GDP per capita will decline for the fourth year out of five,” it said.
PwC said the GDP data reflected poorly on President Cyril Ramaphosa’s economic stimulus and recovery plan, launched in September 2018.