SA economy keeps growing
27 February 2008
South Africa's economy defied forecasts, shrugging off a slowdown in consumer spending to accelerate sharply in the fourth quarter of 2007, driven by strong performances from the economy's two biggest sectors, financial services and manufacturing.
This was South Africa's 33rd quarter of uninterrupted expansion in real GDP since September 1999 - the longest economic upswing in the country's history.
According to figures released by Statistics South Africa on Tuesday, growth in real gross domestic product (GDP) jumped by an annualised 5.3% in the fourth quarter, up from 5.1%, 4.4% and 4.8% in the first three quarters respectively.
This brings South Africa's estimated GDP for 2007 to 5.1%, down from the 25-year high of 5.4% reached in 2006.
Construction boom
Financial services, the biggest sector of South Africa's economy at around 20% of GDP, grew at 8.5% in the fourth quarter and at an estimated 8.3%
for 2007 as a whole, compared to 8.6% growth in 2006.
Manufacturing, the second-biggest sector at around 16% of GDP, rebounded from a 2.5% contraction in the third quarter to grow at 8.2% in the fourth, giving an estimated 3.9% growth for 2007 compared to 5.2% in 2006.
South Africa's construction sector was the biggest mover, however, boosted by the country's infrastructure spending drive. Construction grew at 14.2% in the fourth quarter - its 16th consecutive quarter of double-digit growth - and at an estimated 18.1% for 2007, up from 14.7% in 2006.
At the same time, the relative size of the construction industry grew to 3.5% of GDP in the fourth quarter, raising the annual comparative figure to 3.1% of GDP for 2007.
Retail, mining slump
On the downside, retail sales - South Africa's third-biggest sector at around 14% of GDP - continued to be hit hard by the higher interest rates in the country, slowed to 2.1% growth in the
fourth quarter and to an estimated 5% growth for 2007 compared to 7% for 2006.
And mining, which contributes around 6% to the country's GDP, continued to struggle, contracting by 1.7% in the fourth quarter and by an estimated 0.6% for 2007 as a whole, following a 0.1% contraction in 2006.
Energy shortage
The GDP figures for the first quarter of 2008 will be watched closely for the effect of the country's electricity shortage, which hit hardest in January, causing power cuts across the country.
While the fourth-quarter figures are "incredibly upbeat, ... questions will still be asked about how much deterioration to expect in the first quarter of this year, when we see the worst of the energy crisis impacting on the figures,” Razia Khan, regional research head for Africa at Standard Chartered in London, told Business Day.
Khan added, however, that there remained a "healthy level of strength" in sectors such as agriculture, construction and financial services that would sustain the economy through the electricity crisis.
The National Treasury, in its 2008/09 Budget Review, forecast 4% GDP growth for 2008/09, rising to about 4.6% by 2010, backed by fact that fixed capital investment reached 21% of GDP in 2007/08 and that the pace of this investment was expected to remain "robust".
SAinfo reporter
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