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South Africa – Economic Report

16 July 2012 Saijil Singh, lead analyst, Coface, the international credit insurer

International credit insurer Coface, projects in its quarterly review South African GDP growth of 3,4% for 2012. The report says that consumer spending is remarkably strong in 2012 amidst global fears of the EU debt problem, an indication of the resilienc

This has already been reflected in the commendable performance of the manufacturing sector, where growth expanded at an annualised rate of 7,7%.

Economy by sector:

Within the three basic economic sectors in South Africa, mining and agriculture are the largest contributors to the primary sector, manufacturing to the secondary sector and financial services to the tertiary sector.

Services contribute 65-70% of output in South Africa; mining contributes 10% and manufacturing around 20% of total output. The mining sector saw negative growth in the first quarter of 2012 to -16,8% from 0,7% Q4:11 (SAAR). The key factors contributing to the negative growth were safety-related stoppages and industrial action.

Agriculture saw positive q/q growth from -5,0% in Q4:2011 to 3,4% in Q1:2012 (SAAR). Manufacturing also posted strong positive q/q growth from 4,2% in Q4:2011 to 7,7% in Q1:2012(SAAR). In comparison with other developing nations such as the BRIC nations, South Africa is showing indications of slowed growth due to the European crises, however the effects have so far been marginal.

Weaknesses of the SA economy:

· South Africa suffers from a relatively heavy regulation burden when compared to most developed countries.

· The unemployment rate is high at over 25% and the poor have limited access to economic opportunities and basic services.

· Crime is considered a severe constraint on investment.


South Africa will spend R3,2-trillion in the next three years on over 40 major infrastructure projects, with the focus on building rail, road and economic links in five regions in the country, and building new universities and refurbishing hospitals. There will be an infrastructure summit in August to discuss the implementation of government’s plan in relation to potential investors and social partners. The plan brings together ministers, premiers and mayors of all the country’s metropolitan areas.


While corporate credit extension has begun to improve on the back of increased company earnings, it is also expected to remain subdued in coming months.

While low interest rates are supportive of credit growth, poor economic growth and weak confidence are likely to keep credit growth under pressure for the remainder of 2012. There has been a noticeable change in client-debt profiles over the past 12 months with fewer consumers now defaulting on their repayments.

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