Johannesburg - Even though strikes are spreading and may prove damaging to the mining industry, economists are adamant that the South African economy will be able to avert sliding into a recession.
The general consensus is that recession is likely only if the strikes spread to other sectors. South Africa barely succumbed to the global economic downturn of 2008/09, reporting only one quarter of negative growth. Yet, the country lost 1 million jobs during the period.
Nicky Weimar, Nedbank’s senior economist, said: “You would have to have an absolute collapse to turn the growth numbers into negative.”
But Iraj Abedian, the chief economist at Pan African Investment and Research, said with the rate at which the economy was slowing, if the situation was “not arrested quickly, recession is a possibility”. “We’ve got a couple more quarters to go but we’re definitely on a slippery slope. We’ve got a maximum of four quarters to arrest the situation.”
Weimar said the labour unrest would need to be more broad-based than the mining sector to cause a recession.
The industrial action since August has been the worst strike period since the political stayaways 18 years ago, more so if one factors in the deaths.
August mining production data is due out on Thursday.
The situation, far from abating, was exacerbated on Friday after Anglo American Platinum fired 12 000 striking workers.
The ANC Youth League released a statement saying it was “disturbed” and pledged solidarity with the workers.
Peter Attard Montalto, a strategist at Nomura International, forecast that trade deficits could be wider than R10 billion a month from September to the new year.
Montalto said the current account deficit “could get stuck” wide of 6 percent of gross domestic product due to falling mining output and exports from the impact of the mining and freight strikes.
There is no end in sight for the transport workers’ strike.
Annabel Bishop, Investec’s group economist, said the freight strike was expected to hit jobs in the services industry, especially the retail and hospitality segments, which employed more people than the manufacturing sector.
The government has been criticised for its inaction because the ANC fears upsetting organised labour ahead of the party’s Mangaung elective conference in December.
Montalto noted: “We cannot see this situation changing yet… unless we get a more meaningful market, rating or sovereign risk shock.”
He added that the outcome could be centralised minimum wages and large increases for workers, which could dent competitiveness.
The strikes may well compound the impact of the European situation. Europe is South Africa’s largest trade partner. The strikes add to a toxic mix of factors that make the country’s situation precarious. On Thursday President Jacob Zuma blamed Europe for most of the economic turbulence.
A sign that South Africa’s underlying growth is falling was reflected in the manufacturing sector, which contracted 1 percent in the second quarter, restricting economic growth to an annualised 3.2 percent.
Manufacturing constitutes 15 percent of the economy.
Razia Khan, the regional head of economics for Africa at Standard Chartered Bank, said with the country on watch for a downgrade from ratings agencies, using monetary policy remained an option to provide fiscal stimulus to growth.
“But the more we see an adverse reaction in the currency markets to current events, the more this avenue might be closed to the Reserve Bank. It becomes more important to use ‘soft’ policy to calm the labour situation, to restore confidence and move away from a damaging spiral of bad news.”
Bishop said growth was likely to be slower this year, between 2 percent and 2.5 percent depending on how long the strikes dragged on for, compared with the 2.7 percent growth Finance Minister Pravin Gordhan initially expected. Gordhan is expected to lower his forecast when he presents his medium-term budget later this month.
Bishop estimates growth of 2.8 percent quarter on quarter, seasonally adjusted and annualised, for the third quarter.