President Cyril Ramaphosa says impediments to the country’s economic growth are due to transitional issues and will be resolved.
He’s offered assurances to an increasingly embattled country as South Africa sinks into a technical recession.
Ramaphosa wrapped up his visit to China on Wednesday, where he solidified economic relations.
When Ramaphosa took over as president in February this year, the rand strengthened and business confidence was up. But the last few months have been rocky, with government increasing value added tax while fuel prices continue to rise.
Ramaphosa has reacted to concerns by South Africans.
“The important thing people should realise is that countries go through cycles. There are upward and downward movements. We are susceptible to what happens in the world. All these things happening are transitional issues that are going to pass.”
The president adds things will “look brighter” soon, as government focuses on its medium and long-term economic goals which will get the economy back on track.
The country has entered recession in the second quarter for the first time since 2009, data showed on Tuesday, in a stinging blow to Ramaphosa’s efforts to revive the economy after a decade of stagnation.
Statistics South Africa said the economy contracted by 0.7% quarter-on-quarter, led by declines in the agricultural, transport and retail sectors.
The rand stretched losses against the dollar to more than 2% and government bonds fell after the data was released. Analysts had predicted the economy would grow 0.6% in the latest quarter.
“We are in a recession. We reported a contraction in the first quarter … and now in the second quarter with a fall of 0.7 percent,” Statistician-General Risenga Maluleke said.
Africa’s most developed economy needs faster economic growth if it is to reduce high unemployment – currently at 27% – and alleviate poverty and inequality that stokes instability.
Unemployment is a hot-button issue ahead of national elections in 2019, and the African National Congress (ANC) has made repeated pledges that things will improve.
Statistics South Africa said agricultural output fell 29.2% in the second quarter, while the transport, communication and storage sector shrank 4.9%. Mining output grew by 4.9% and finance by 1.9, however.
Statistics South Africa said the economic contraction in the first quarter was steeper than initially recorded, at 2.6%, and that gross fixed capital formation fell by 0.5% in the second quarter.
Ramaphosa has made wooing foreign and domestic money a cornerstone of his economic reform agenda, so the investment numbers will come as a big disappointment.
The buoyant market mood that took hold after he was elected leader of the ruling ANC in December and then president of South Africa in February appear to have dissipated.