South Africa’s Economy Seen Growing 4.1% 2021

South Africa’s economy is on track to grow 4.1% in 2021, above recent median forecasts for Sub-Saharan Africa as a whole but not enough to make up for last year’s huge contraction.

The rebound comes after a 7.0% contraction last year and the latest median forecast of economists polled in the past week was 0.2 percentage points better than in last month’s survey. Next year’s growth was expected to slow to 2.4%.

Eskom, which supplies most of the electricity to Africa’s most industrialised nation, has been implementing regular power cuts, or load-shedding, due to ageing coal-fired power stations. A slow pace of COVID-19 vaccinations is another drag on growth.

“Until now, concerns about load-shedding, a third wave of COVID-19 infections, and the pedestrian local vaccine rollouts have been the crucial factors explaining the hesitancy to notably boost the real GDP growth forecast for 2021,” said Hugo Pienaar at the Bureau for Economic Research.

The country’s gross domestic product expanded by 1.1% quarter-on-quarter in the first three months of 2021 on a seasonally adjusted basis, after an expansion of 1.5% in the fourth quarter of 2020.

Pienaar added risks were now materialising but better-than-expected Q1 GDP data, as well as indications that at least some of the momentum was sustained this quarter, imply GDP growth of potentially well above 4% in 2021 was becoming a reality.

On a seasonally adjusted and annualised basis, the economy grew 4.6% quarter-on-quarter, following growth of 5.8% in the previous quarter. “Importantly, like the second wave, this assumes a continued light(er) touch from government on lockdown restrictions through the third wave,” said Pienaar.