South Africa’s economy grew by 5.1% in 2007, its third successive year of growth at around 5%, according to data released by Statistics South Africa on Tuesday 26 February.
Gross domestic product (GDP) was some R2-trillion (US$266-billion) for the year. Statistics South Africa’s annualised figures put GDP growth at 5.8% in the first quarter of 2007, 5.1% in the second, 5.2% in the third and 4.6% in the fourth, compared to the same quarters of 2006.
Both the rand and the JSE, South Africa’s stock exchange, surged at the news. The JSE’s All Share Index closed 1.62% stronger at 30 297 points on Tuesday, after opening at 29 813. The rand rallied 1% to R7.52 against the dollar, its strongest showing since 19 February.
The figures confirm that South Africa is still enjoying its longest uninterrupted period of economic growth since records began. Real GDP rose by 3.7% in 2002, 3.1% in 2003, 4.9% in 2004, 5% in 2005, and 5.4% in 2006. That year’s growth was the highest in 25 years.
Demand for power
The strong figures indicate that the demands of a growing economy are indeed responsible for South Africa’s current power crisis.
“The data are incredibly upbeat but questions will still be asked about how much deterioration to expect in the first quarter of this year, when we see the worst of the energy crisis impacting on the figures,” Razia Khan, regional research head for Africa at Standard Chartered in London, told Business Day.
“Looking at the strength of the economy – in sectors like agriculture, construction and services – there is still a healthy level of strength that will help sustain it through the worst of the crisis.”
Absa Capital told the newspaper the power outages are likely to curb growth in the first quarter of 2008 to half the pace seen in the last quarter of 2007.
Drivers of growth
According to Statistics South Africa, the main drivers of growth in 2007’s final quarter were manufacturing, financial services and construction.
Manufacturing – the economy’s second-biggest sector – grew by a surprising 8.2% in the fourth quarter after falling 2.5% in the third after a series of strikes in the vehicle industry.
Growth in financial services, the economy’s biggest sector at 20% of GDP, slowed to 8.5% from 12.3% in the third quarter but continued to drive economic growth.
Construction rose 14.2% – its 16th successive quarter of double-digit growth, partly a result of the government’s infrastructure spending drive.
Growth in retail sales, the economy’s third-biggest sector, dropped to 2.1% in the last quarter, its slowest rate in six years, while mining contracted 1.7% after strikes forced some closures.
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