Gigaba buoyant despite economic contraction

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File: Finance Minister Malusi Gigaba said South Africa can regain its investment-grade rating.

JOHANNESBURG - Finance Minister Malusi Gigaba says he'll meet business leaders soon.

He wants to discuss ways of working together to achieve economic growth, following news that the country is now in recession.

But, what does the word mean, and how will it affect the average South African?

READ: South Africa slips into recession as economy shrinks

South Africa has had a depressed rate of economic growth for some years now.

What’s different this time around?

We are in a recession now, which means the country’s economy has shrunk for two consecutive quarters.

In the fourth quarter of 2016, the economy contracted by 0.3 percent. Stats SA has reported a decrease of 0.7 percent for the first quarter of this year.

South Africa has experienced 8 economic recessions since 1961.

Two of those occurred in the past 8 years.

The longest recession took place in 1991 and 1992, mainly as result of a global economic downturn.

The most recent recession took place across three quarters in 2009, when the country became caught up in the global financial crisis.

Recession is indicated by a decrease in output in major sectors, as well as a decrease in consumer spending.

The trade and manufacturing industries were the biggest production-slowers, with trade falling by 5.9 percent, and manufacturing by 3.7 percent.

The retail sector, which makes up 40-percent of total household spending, and just more than 6-percent of the gross domestic product, is expected to remain weak throughout 2017, due to economic strain on domestic consumers.

What does this mean for you and me?

“The economy is struggling - as it struggles there will be very little expansion. It means there will be very little job creation, which means the unemployment rate will not come down significantly," said Joe de Beer of Statistics South Africa

"You will remember that Stats SA released jobs numbers which showed very high levels of unemployment, and now it’s reflected in the economy,” he added.

When economic activity slows, businesses begin to suffer, because consumers cut down on spending and hold on to as much money as possible to meet their expenses.

It’s not clear when South Africa's economy will start to recover.

The global average for periods of recession is 3 to 6 quarters.

National Treasury’s response to the economic recession: