Is SA heading for a recession?

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JIMMY MOYAHA: Stats SA released our GDP numbers today and, for the first time in quite a bit of time, no surprises – or not too many surprises, I suppose. The numbers aren’t looking good. We expected that we’d be at a very different point this time, and based on these numbers that came out today, we had expectations around where year-on-year GDP would sit. And it’s not there.

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I’m joined on the line by Crystal Huntley, who’s an economist at Nedbank Group, to take a look at the latest GDP data as well as what it means for us.

Good evening, Crystal. Thanks so much for taking the time. What happened with the data reading? What sectors let us down?

CRYSTAL HUNTLEY: Good evening, Jimmy. Thanks for having us on your show, and good evening to your listeners as well. As you said, Stats SA released their Q3 numbers earlier today, and we saw a contraction of 0.2%. This was worse than we at Nedbank had expected. We were forecasting growth of 0.1%.

Market forecasts were for growth of around ‑0.1%. So on a quarter-on-quarter basis, we did do a little bit worse than we were all expecting.

If I can break it down into the production side versus the expenditure side, on the production side, the industries that contracted were the primary sector as well as the secondary sector. We did see some growth in the services sector, with the exception of domestic trade, which declined. And if we consider the expenditure side, there was a contraction across the board, across the expenditure variables that we look at. There was slight growth, however, in government expenditure.

JIMMY MOYAHA: Crystal, how much of the contractions, especially on the primary and secondary sectors, can be attributed to factors like our logistics woes and our electricity woes?

CRYSTAL HUNTLEY: Spot on. If we are looking at both primary and secondary sectors, we had load shedding 85% of the time throughout the third quarter. This was up from 80% of the time in the second quarter. So that plays a big part in terms of the impact on industry.

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And also if you just consider the constraints that we are seeing at Transnet – case in point, the recent releases of the delays that we’ve been seeing outside three of the major ports in the country. So these factors are definitely impacting industry and particularly your more energy-intensive sectors such as your mining and your manufacturing, and also your agriculture.

JIMMY MOYAHA: Crystal, I remember at the last MPC meeting the Reserve Bank governor was very optimistic around GDP outlook numbers and all of that. On the back of that, we didn’t see interest-rate hikes, etc. Are we anticipating that the narrative is going to change from the Sarb following this print? Obviously, they don’t take one print into account, but is this enough of a contraction to raise concerns for them?

CRYSTAL HUNTLEY: I think the short answer to that is no. I think that the numbers are broadly expected, if you can just see – with respect to what we’re forecasting, what the market was forecasting – the weakness is generally expected. Also, with the 475 basis-point increase in interest rates that we are currently living with, this is definitely going to filter through and start impacting consumers in terms of their finances, in terms of their expenditure. And as the Reserve Bank – while you are hiking interest rates, you are anticipating this … monetary policy would be ineffective.


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This is more in line with the effects of this hike in interest rates that we’ve seen, so something that they would’ve expected, and I do not think that it would weigh on their decisions going forward, well this particular print.

JIMMY MOYAHA: Crystal, going forward, let’s look at some of those numbers. What is the outlook or the consensus for Q4? Typically with the festive period, we’re going to see some uptick, hopefully in economic activity or in consumption expenditure, at least. Where does this print put us for Q4, but more importantly for the full year? Do you still think we’re going to have a positive year?

CRYSTAL HUNTLEY: Nedbank’s forecast for the fourth quarter is around 0.1%. Our forecast for the overall year is around 0.5%. This is stronger than the initial forecast, and I’ll tell you why. It is because in the first quarter and the second quarter, we had relatively – I say relatively – strong growth. Not that it was exceptional, but we did have much stronger-than-expected growth in the first and the second quarters.

If I can touch on your point on consumer expenditure and the expectation that there would be an uptick in household consumption expenditure over the fourth quarter, yes and no. Yes, to the extent that there would be some upward impetus because of the festive season. However, how much so is constrained by this higher interest-rate environment that is consuming a larger portion of household income in terms of your higher debt-service costs.

JIMMY MOYAHA: Crystal, what do you think about the possibility or the prospect or even the thought that 2024 could be a recessionary year for South Africa? If we do achieve 0.4% for this year, that’s not much of a growth outlook. By the term ‘growth’, yes, it is positive. But if we compare it with what we’ve seen in the past and where we know we can be, 0.4% isn’t much. Does it then put us on the right track for a positive 2024?

I ask this because I just spoke to Chantal Marx of FNB, and she’s of the opinion that we could still see a US recession next year. If that happens, that could be a catalyst for a global recession. What are our recessionary thoughts for the SA economy?

CRYSTAL HUNTLEY: We are not anticipating a recession for the South African economy. At Nedbank, our forecast for growth for next year is around 1.1%. We are expecting a bit of an uptick in the second half of the year, by when we are forecasting a drop in interest rates and likely a bit of an uptick in expenditure.

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But we are also waiting on seeing some developments with respect to the REIPP programme, the Renewable Energy Independent Power Producer programme. We are expecting to see some of those investments come on board, and with that we’re expecting to see a bit of a decline in load shedding.

JIMMY MOYAHA: A very optimistic outlook. We’ll leave it at that. Thanks so much, Crystal.

That’s Crystal Huntley, economist at the Nedbank Group giving us a sense of their reflections on the quarter’s GDP numbers that came out today, what we could potentially see out of fourth-quarter GDP numbers and just their thoughts on 2024.

Harry Byrne

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