Fears of another recession in S.Africa as economy shrinks amidst poor farming, mining data

Investors and business managers in South Africa were soused to another bout of bad news on the economy Tuesday after data came in of a contraction more than expected in the first quarter led by a slowdown in agriculture and mining.

The news immediately sent the rand lower as investors were given a shock reminder of the fragility of last year’s economic rebound.

Gross domestic product (GDP) a measure of economic values shrank by 2.2 percent in the first three months of 2018 after expanding by 3.1 percent in the final quarter of last year, Statistics South Africa said on Tuesday.

Itwas the largest quarter-on-quarter decline since the first quarter of 2009, when the economy contracted 6.1 percent, the agency said.

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The rand weakened nearly one percent.

South Africa’s economy has barely grown in the past decade with fiscal missteps and corruption contributing to weak business and consumer confidence.

Investor sentiment picked up after new President Cyril Ramaphosa pledged to clean up poor governance that set in under former President Jacob Zuma, who was forced out by the ruling party in February but it is now clear that the economy cannot be sustained by a mere feel good factor.

Africa’s most-industrialized economy hasn’t grown at more than 2 percent a year since 2013 and is struggling to gain momentum despite political changes that bolstered investor confidence.

“Ramaphoria has to be followed by concrete policy and concrete change, and I think that many want to see faster change,” Thabi Leoka, an independent economist, said by phone. “Currently I think we are still grappling with

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Economists polled by Reuters had expected a quarter-on-quarter GDP contraction of 0.5 percent.

The agriculture sector shrank 24.2 percent in the quarter due to poor horticulture output, followed by mining which fell 9.9 percent and manufacturing was down 6.4 percent.

GDP rose 0.8 percent on an unadjusted year-on-year basis in the first quarter, compared with a 1.5 percent expansion in the previous three months, the agency said.

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