It is easy to get locked into the downward spiral of negative news in South Africa but here are a few signs to indicate that important parts of the local economy are showing promising signs of life.
1) The Mining Sector Grew for the First Time in 12 Months
Mining production rose 0.8% year on year in February, the first month since February 2020 in which it has not declined. Last year was a rough year in the mining sector. In April 2020, output in the sector shrank almost 50%, and while the contractions since have been smaller, they have still been contractions. Getting back to pre-Covid levels of production will take some time. Minerals sales in February 2021 rose a robust 26%, a trend that has been in place for months. “In 2020, prices for palladium (in US$ terms) increased by 43.2% and rhodium by 187.2%. In rand terms, rhodium prices climbed by 222.6%,” StatsSA said. And this bull run has been extended into 2021.
This strength in the mining sector has helped to boost the government’s tax revenue of almost R176.4 billion in February 2021, which was significantly higher than the R160.4 billion earned in the same month in 2019. The upswing in tax income could mean that instead of the Treasury’s expected budget deficit of 14.6%, South Africa may “only” have a budget deficit of 10.9% at the end of the fiscal year, Intellidex forecasts.
2) Agricultural Exports are Booming
South African agricultural exports reached $10.2 billion last year – the second-best year ever. The wheat harvest was the biggest in almost two decades, while other crops like barley and canola harvests were the largest on record.
3) Diesel Demand is almost back to Pre-Covid Levels
Sasol released its results for the six months to end-December, noting that demand for diesel is currently almost at pre-pandemic levels whilst petrol is at between 90% and 95% of previous demand. Wayne McCurrie of FNB Wealth and Investments tweeted that the strong recovery in diesel may be an indication that the contribution from agriculture to the economy is being underestimated. Thanks to good rains and bumper crops, South Africa’s agricultural sector had a great 2020, despite the pandemic.
4) Surprising recovery in jobs
New data published by the National Income Dynamics Study show that employment levels recovered quicker than many anticipated. In October, employment almost matched February levels, before the pandemic bit. Educated young people, with at least matric, drove the employment recovery, and agriculture, manufacturing, and trade all bounced back to beyond pre-pandemic levels.
5) Consumers are Looking Solid as the Benefit from Lower Interest Rates
The latest retail sales numbers beat expectations. While total sales in December were 1.3% lower than a year before – this was far better than the 2.3% decline expected by economists polled by Bloomberg. One possible reason for stronger-than-expected retail sales numbers is that South Africans are “reallocating” their spending. Because many consumers don’t have to spend so much money on travel, dining out, entertainment, and other social events, they now have more cash to spend on other things – like food, clothes, and home improvements. Also, thanks to steep cuts in interest rates, many households suddenly have more money to spend. On a property of R2 million, a homeowner now pays almost R4,000 less a month than in 2019.
6) Exports Exceeded Imports
South Africa exported products worth R270.63 billion more than it imported in 2020 - compared to a trade surplus of only R23.66 billion in 2019. While the value of exports increased by 22% in 2020, a sharp fall in the price of oil - South Africa's biggest import product - also helped the trade surplus.
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