How July riots pummelled SA's economy

Covid-19 restrictions also among headwinds that stymied business sectors

SA's economy contracted between July and September due to the civil disorder in July, tighter Covid-19 lockdown restrictions during the third wave and several other headwinds. File photo.
SA's economy contracted between July and September due to the civil disorder in July, tighter Covid-19 lockdown restrictions during the third wave and several other headwinds. File photo.
Image: Alaister Russell/The Sunday Times

After recording four consecutive quarters of positive growth, real GDP slumped by 1.5% between July and September, eroding some of the gains the country had made since Covid-19 hit SA last year.

Data released by Stats SA on Tuesday attributed the slump to the impact of the July civil unrest combined with the Covid-19 restrictions amid the third wave of the pandemic.

In the third quarter of 2021, the level of GDP was on par with the first quarter of 2016.

Six of the 10 industries recorded a decline in production in the third quarter, with agriculture, trade and manufacturing the hardest hit.

The agriculture industry recorded its biggest drop in production since 2016, contracting by 13.6%.

“Together with a decline in the production of animal products, the industry in KwaZulu-Natal was dealt a major blow by the civil disorder in July. Maize, citrus and sugar cane farms recorded losses from fires set during the upheaval,” said Stats SA.

The trade industry shrank by 5.5%, with all trade sectors reporting losses.

“Wholesale, retail and motor trade were negatively affected by the widespread looting and destruction that gripped KwaZulu-Natal as well as Gauteng. Retail businesses were the most affected.”

The manufacturing industry declined by 4.2%, dragged lower in the main by the civil disorder and global shortages of raw materials.

The transport and communications industry didn’t escape unscathed. Road freight transport into and out of KZN was severely disrupted by the violence.

Other headwinds included a cyberattack that disrupted operations at SA ports and dealt a further blow to the motor trade. And in response to the rapid spread of the Covid-19 Delta variant, the country was placed on alert level 4 lockdown from June 28 to July 25.

“This stymied growth in the tourist accommodation sector, as well as constricting restaurant and catering trade,” the report said.

Several domestic airlines recorded flight cancellations after leisure travel restrictions imposed by the tighter regulations.

Survivors

Of the sectors that managed to keep their heads above water:

  • The finance industry increased economic activity by 1.2%.
  • Personal services saw an uptick in economic activity on the back of increased spending on private health care and the rollout of Covid-19 vaccines for those aged between 18 and 35.
  • General government expanded by 0.4%, attributed to a rise in employment in local government and extrabudgetary accounts and funds.

Household spending and exports drive down expenditure on GDP

Stats SA also measures the expenditure side of GDP, providing an indication of total demand in the economy. This includes measures of household expenditure, government expenditure, investment (gross fixed capital formation and changes in inventories), and net exports.

Household final consumption expenditure decreased by 2.4%.

“The looting and closure of retailers in KwaZulu-Natal during the civil disorder resulted in food shortages. Many consumers struggled to buy basic supplies” Stats SA said.

“The adjusted level 4 lockdown restricted trading hours and limited restaurant activity.

“Declines in fuel sales and a decrease in the trade of furniture and appliances also contributed negatively to household expenditure growth.”

Exports decreased by 5.9%. This came as shortages of parts disrupted the production and export of motor vehicles, Stats SA said.

“The civil disorder in July also had an impact on manufacturers, who struggled to transport goods to the Durban port.”

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