The Real Economy Bulletin - First Quarter 2021

Main Bulletin: The Real Economy Bulletin - First Quarter 2021

In this edition

Gross domestic product: GDP grew by 2.7% in the first quarter of 2021. High mining prices continued to boost growth above initial expectations. Still, the economy was 2.9% smaller than in the first quarter of 2019, before the pandemic. Read more.

Employment: Employment continues to recover more slowly than the GDP, with the worst hit among lower-level workers. As of the first quarter 2021, South Africa had recovered almost 800 000 jobs, but total employment was still 8% below the first quarter 2020, just before the pandemic hit South Africa. The figures show no significant change in employment from the fourth quarter 2020. They are not seasonally adjusted, however, so they understate the recovery to some extent. Read more.

International trade: As it has throughout the pandemic, South Africa ran a near-record balance of trade surplus in the first quarter of 2021, despite some decline over the previous two quarters. The surplus mostly reflected continued high prices for metals exports, with a spike in platinum over the past six months. Manufacturing exports almost reached pre-pandemic peaks, with growth across most industries. Manufacturing imports also rebounded, although less strongly, with rising demand for capital and transport equipment and for chemicals. Read more.

Investment: Private investment fell in the first quarter of 2021 in seasonally adjusted terms, even though it remained almost 20% lower than in 2019. In contrast, public investment showed modest growth. Returns on assets continued to improve for mining and manufacturing in the fourth quarter of 2020 – the latest available data – but declined for construction. Read more.

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects on a quarterly basis, using published information. In the first quarter of 2021 it identified 18 projects. For 16 projects that provided estimates, the value came to R65 billion. Most of the new initiatives were in utilities, dominated by projects selected as preferred bidders in the Risk Mitigation Independent Power Producer Procurement Programme. In addition, the Tracker captures changes in the status of 10 previously reported projects. Read more.

Briefing note: The pandemic and the economy in Southern Africa: Like most of the world outside of China, Southern Africa endured an economic depression in 2020 as a result of the COVID-19 pandemic. The economic outcomes varied significantly over the course of the year, however. A sharp downturn linked to regional and international lockdowns in the second quarter was followed by a rebound in the remainder of the year. Still, for 2020 as a whole, the regional GDP was around 6% below 2019; excluding South Africa, the decline was 5%. For comparison, in the 2008/9 financial crisis the regional GDP shrank less than 2%. As of April 2021, the IMF expected the region as a whole to return to 2019 GDP levels by 2022, but it forecast that South Africa and Zimbabwe would lag behind. Read the briefing note online: The pandemic and the economy in Southern Africa.

Briefing note: Manufacturing subsector reports: The effectiveness of industrial policy interventions depends on the ability of policymakers to tailor interventions to the specific needs of individual subsectors. TIPS has prepared a series of notes that synthesise the available data on the manufacturing subsectors, specifically in their contribution to GDP, employment, and international trade. They provide profiles on food and beverages; clothing, textiles, footwear and leather; wood and paper products; printing and publishing; capital equipment; electronics and appliances; transport equipment; glass and other non-metallic mineral products; metals and metal products; chemicals and refined petroleum; other chemicals; rubber and plastics; and furniture and manufacturing not elsewhere classified. This briefing note summarises some of the findings. Read the briefing note online: Manufacturing subsector reports.

Briefing note: Disrupting electricity - new measures on embedded generation: On 10 June 2021, President Cyril Ramaphosa announced that the government would urgently escalate the National Energy Regulator of South Africa (NERSA) licensing threshold for embedded generation projects from 1MW to 100MW. This move will vastly disrupt the electricity supply system, but it was unavoidable because the older system was no longer fit for purpose. As with most disruptions, it promises enormous benefits, but also some risks. The challenge for companies, worker representatives and policymakers will be to maximise the rewards while managing the inevitable costs and risks attendant on any major change. Read the briefing note online: Disrupting electricity - new measures on embedded generation.