South Africa surpassed the expectations of many as they avoided recession, with 3.3 percent GDP growth in the second quarter of 2016. This is on the back of a dismal first quarter, where the economy declined by 1.2 percent. According to Bloomberg data, the Q2 report marks the fastest pace of growth for South Africa since 2014.

Manufacturing was the largest positive contributor to the second quarter GDP growth as it increased by 8.1 percent and contributed 1 percentage point. Mining and quarrying recovered in the second quarter, increasing by 11.8 percent and contributing 0.8 of a percentage point. Finance, real estate, and business services increased by 2.9 percent and contributed 0.6 of a percentage point to GDP growth. The industries that fell in the second quarter were agriculture, forestry and fishing; and electricity, gas, and water.

The primary and secondary sector accounted for the bulk of the growth, growing 8.8 percent and 5.3 percent respectively. The tertiary sector grew by 2 percent. Statistics South Africa, the nation’s statistics agency, said another turning point for SA was in exports and imports. In the second quarter, net exports of R5 billion were reported as exports of goods and services increased by 18.1 percent. Exports of precious metals and transport equipment were largely responsible for the increase. Conversely, importation of goods and services decreased by 5.1 percent. Importation of machinery and electrical equipment were largely responsible for the decrease.

What next?

South Africa escaped a technical recession, defined by two successive quarters of decline. Many African nations have suffered this fate in 2016. Nigeria is the most prominent. It saw its GDP take a massive hit due to declining oil prices.

Despite its apparent ‘victory’, the next two quarters of the year remain far from a forgone conclusion for South Africa’s economy, with little anticipation for major economic growth. South Africa still faces some economic challenges in Q2 and Q3 amid political instability and uncertainty around criminal charges against finance minister Pravin Gordhan.

According to Nomura, a financial research group, the country’s current path is leading to an all but guaranteed rating downgrade to junk status in December and faces potential political shocks along the way – including a possible cabinet reshuffle.

In June, rating agencies gave South Africa the benefit of the doubt in affirming its current rating based on the government’s commitment to fiscal consolidation. The rating agencies’ faith in South Africa would have been bolstered by the Q2 results although they would be keeping a close eye on the political situation in the country.

South Africa may be out of the woods for now but Gordhan’s arrest or removal from Treasury may likely put economic recession back on the cards.

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