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Nene: South Africans must not panic over slide into recession

Eyewitness News logo Eyewitness News 2018-09-05 Clement Manyathela

a man wearing a suit and tie: FILE: Finance Minister Nhlanhla Nene. © GCIS. FILE: Finance Minister Nhlanhla Nene. BEIJING/JOHANNESBURG – Finance Minister Nhlanhla Nene says South Africans must not panic over the country’s slide into technical recession and trust government’s plan.

Nene was speaking on the sidelines of the Forum on China Africa co-operation in Beijing following Stats SA’s announcement that the economy has contracted by 0.7% in the second quarter. 

This follows a dismal performance in the first quarter‚ when the GDP shrank by a revised 2.6%.

Nene says government’s message is clear.

“I don’t think people should panic. Of course, it’s okay for people to be concerned, which is a good sign but I think it’s also going to call on all of us to work together to lift the country out of this.”

But lifting the country out of recession needs a plan from government, a plan Nene says they are working on.

“The investment conference that’s coming, there’s the jobs summit that’s coming. We’re building up to the medium-term budget policy statement, the real reform package that comes out of the Cabinet process is also in the pipeline.”

Related: From Zuptocracy to Ramageddon — the local economic meltdown in three acts

The minister says that government was hoping the country would narrowly escape recession, with a moderate economic recovery from the previous quarter.

Nene added that while the government is not entirely surprised, it's disappointed in the numbers.

The largest negative contributors to growth in GDP were agriculture, transport and trade.

“We didn’t think we would have the second contraction, we were hoping we would have a moderate recovery.”

But he said that government is working on a plan to finalise the structural reform package.

Nene said he doesn’t think that the latest figures have something to do with the current heated debate around the expropriation of land without compensation but says government can’t deny that the VAT increase and fuel price hikes have had an impact on the numbers.

ECONOMISTS REACT

Economists say the latest gross domestic product (GDP) figures were not expected, with many predicting positive growth.

Economist Azar Jammine explains what a recession means.

“Officially, recessions are defined as situations where the GDP contracts for two consecutive quarters, it’s an attempt at trying to describe a situation where things are actually deteriorating.”

Economist Nicky Weimar said: “It’s not really that surprising, we had the monthly numbers that indicated to us that underlying activity remained exceptionally weak in the second quarter. The big question really was around some factors that we didn’t have or don’t have regular monetary statistics on."

(Edited by Leeto M Khoza)

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