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South Africa’s economy contracts

More gloom! South Africa’s economy has suffered its worst quarter since the financial crisis.

South African GDP shrank at an annual rate of 3.2% in the first three months of 2019, new government data shows. That’s twice as bad as expected (it’s effectively a 0.8% contraction quarter-on-quarter).

South Africa’s manufacturing, mining and agricultural sectors all shrank, in a blow to newly re-elected president Cyril Ramaphosa. Agriculture industry contracted by 13%, mining fell 11%, while manufacturing decreased by 8.8% year-on-year.

The downturn was partly due to a series of national power cuts, as supplier Eskom Holdings struggled to keep the lights on. That badly hurt business and investor confidence.

It’s only six months since South Africa emerged from its last recession – now it risks falling into another one, unless growth picks up this quarter.

The rand was more than 1% weaker at 14.60 per dollar after the figures showing growth nosedived 3.2% in January-March compared with the previous three months.

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Economists had only expected a 1.7% contraction.

Year-on-year growth in Africa’s most industrialised economy was zero compared with forecasts for growth of 0.7%.

Bonds also weakened, with the yield on the benchmark 10-year issue up 4 basis points at 8.45% following the data release.

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