Before the GDP numbers were released, The Common Sense argued that business and consumer confidence levels, which had fallen through the second quarter, would see the growth rate come in at 1.2%. Business confidence fell to 39 points in the second quarter, from 47 points in the first quarter (a reading below 50 means most businesses see conditions as unfavourable). Consumer confidence fell to negative 19 points in the second quarter compared to negative seven points in the first quarter (a negative reading means more households expect their finances to worsen than improve). As a consequence, the fixed investment rate had fallen to 13.4% of GDP in the second quarter from 14% in the first quarter, far below the 25% to 30% recorded by South Africa’s emerging market peers.

The sectors behind the weaker second-quarter GDP number were mining, manufacturing, and trade. Mining contracted by 0.6% year on year in the second quarter, down from growth of 5.4% in the first quarter. Manufacturing fell by 3.0% after a 0.6% decline in the first quarter, while trade, catering, and accommodation slowed to 0.3% from growth of 2.6% in the first quarter.

Bheki Mahlobo told The Common Sense, “The most important thing to understand about the data is not which sector moved from where to where, from one quarter to another, but rather to step back and look at the greater whole. If you do that, the thing that stands out is that the overall rate of economic growth is stuck in a band of around 1% and it is going to stay there because with a fixed investment rate of 13.4% it necessarily must.”

On average, South Africa creates about 100 000 net new jobs per year for every one point of annual GDP growth. That guideline has held true for much of the last 30 years and means that at the current rate of economic growth South Africa is not going to see much life in its labour market.

Since the National Development Plan was first published in 2012 South Africa has created only two million net new jobs. That comes to just around 150 000 net new jobs per year, which is exactly in line with an economic growth rate that has bounced along at between 1% and 1.5%.

The chart below shows the number of people in employment in South Africa since 2012.

Mahlobo says, “If you step back from all of that and ask question what it will take to get South Africa’s unemployment rate of around 30% down to about 10%, and how long will that take, the answer is holding the economic growth rate at 6% for about 20 consecutive years. That is a statement on how far off-track South Africa’s economy is in terms getting behind the policies that would be necessary to improve the lives of millions of people.”