THE BLOG

Agriculture Has Pulled The South African Economy Out Of Recession

SA is still battling record-high unemployment and poverty levels, low investor confidence and a lot of uncertainty with regards to the policy environment.

07/09/2017 03:59 SAST | Updated 07/09/2017 06:13 SAST
Vasily Fedosenko/ Reuters

South Africa's economy is out of recession after a second quarter GDP growth of 2.5 percent quarter-on-quarter. Gross domestic product (GDP) contracted by 0.7 percent in the first quarter of 2017, following a decrease of 0.3 percent in the fourth quarter of 2016 pushing the country into a technical recession.

Although this is much-needed growth that will be welcomed by all South Africans, it will have little positive effect on the economy. Longer-term indicators indicate subdued growth.

Coming out of recession does not mean much -- the country is still battling with record-high unemployment and poverty levels, low investor confidence and a lot of uncertainty with regards to the policy environment.

Unfortunately, this growth might not even be enough to put South Africa in a better position with the ratings agencies. Important to note is that South Africa has not achieved three consecutive quarters of growth since 2014/15, making it one of the worst performers among emerging market economies.

The agricultural sector increased its contribution by 33.6 percent in the second quarter of 2017.

This is owing to its unstable political environment resulting in policy uncertainty, corruption and a lack of economic and political leadership. Having said that, as South Africans, we welcome the news of positive growth with the hope that persistent growth will be pursued going forward, provided there is political will.

Once again, it is pleasing to see a second consecutive quarter positive contribution by the agricultural sector to GDP growth.

Despite the low output in Western and Eastern Cape, due to the persisting drought, the agricultural sector increased its contribution by 33.6 percent in the second quarter of 2017. This was driven by substantially increased output in the summer crops producing areas.

Given this, it therefore suffices to say that the agricultural sector has played a significant role in taking the economy out of recession. With that in mind, it is therefore important government make the development of agriculture a national priority.