SA’s manufacturing sector entered recession in the second quarter — putting a damper on the optimism President Jacob Zuma expressed on Tuesday that the economy would improve over the medium term.
Mr Zuma said while SA’s economy, like many others around the world, was struggling to recover from the 2008 global financial crisis, it was wrong to assume that everything was "doom and gloom".
In an unprecedented move, he delivered a progress report on his February state of the nation address.
Although Mr Zuma was confident of 2% economic growth this year, manufacturing data released on Tuesday were the latest to suggest otherwise.
Electricity supply shortages were the major obstacle to growth and would likely shave off one percentage point, the president admitted.
Despite data pointing to a weak economy, Mr Zuma said growth was expected to "rise steadily" to at least 3% in the next three years as electricity constraints eased.
Power outages were among the main reasons for lower manufacturing output. Low productivity, regular labour market disruptions, rising import intensity and weak business confidence were other challenges for the sector, Stanlib chief economist Kevin Lings said.
Manufacturing production fell 0.4% in June compared with the same month last year, Statistics SA data showed on Tuesday. Seasonally adjusted manufacturing production fell 1.2% in the second quarter after contracting 0.5% in the first — indicating recession in the economy’s fourth biggest sector.
Mr Zuma said SA was going ahead with its nuclear power plans as part of ensuring a "reliable energy mix", adding that plans were at an advanced stage and that procurement processes would be concluded within this financial year.
Manufacturing was not the only troubled sector.
Mining and steel industries have also been hard hit by power supply shortages and lower commodity prices to a point where they were threatening to cut jobs.
Manufacturing has already shed 23,000 jobs in the second quarter, according to Stats SA’s quarterly labour force survey.
Threats of job losses were "of serious concern" to the government, which hoped a series of crisis meetings would yield "a positive outcome", Mr Zuma said. He announced interventions in energy, tourism and business that he said would improve investment and lift growth.
An interministerial committee on immigration chaired by Deputy President Cyril Ramaphosa would investigate the "unintended consequences" of stricter new visa regulations; and an investment facilitation centre to cut out administration hurdles and support investment would be set up.
National police commissioner Riah Phiyega’s response to the requirement that she inform Mr Zuma why she was fit to hold onto her job was receiving attention, he said.
"The implementation of the report on the tragic incidents that took place in Marikana, leading to the killing of more than 44 people, is receiving top priority," he said.
He was also in discussion with the ministers whose portfolios are affected by the Marikana report, such as police, labour, mineral resources as well as justice and correctional services.
Democratic Alliance leader Mmusi Maimane said Mr Zuma’s update was nothing more than a public relations stunt.
The government in February announced a nine-point plan aimed at finding new growth opportunities.
It included resolving the energy crisis, beneficiation, improving industrial policy, growing the ocean economy and stabilising the labour market.
by Ntsakisi Maswanganyi , With Wyndham Hartley for BDLive