A sharp contraction in mining tipped economic growth into negative territory in the first quarter of 2016. South Africa’s economy shrank by 1,2% quarter-on-quarter (seasonally adjusted and annualised), according to the latest gross domestic product (GDP) figures published by Stats SA. Year-on-year growth for the same quarter was -0,2%.

The supply side of the economy: transport joins agriculture in recession

The mining industry contributed the most to the 1,2% quarter-on-quarter fall. Lower production in the mining of ‘other’ metal ores, largely platinum group metals and iron ore, saw the industry contract by 18,1%.

If mining is excluded from the picture and non-mining growth is measured, the economy would have experienced growth of 0,5% instead of -1,2%.

The impact of adverse weather continued to plague agriculture as the industry recorded its fifth consecutive quarter of negative growth. Agricultural production has fallen by 14% since the fourth quarter of 2014.

The slowdown in mining and agriculture has had a knock-on effect on industries further along the production chain. Lower demand for energy, especially from mining, saw the electricity industry contract by 2,8%.

The transport industry recorded its second consecutive quarter-on-quarter fall in activity, now joining beleaguered agriculture in recession territory. A fall in demand for freight and passenger land transportation contributed to the decline.

Introducing a more nuanced picture of the economy

Stats SA has, for the first time, introduced expenditure on gross domestic product (GDPe) in the GDP statistical release. Historically Stats SA has published GDP production (GDPp) figures only, measuring the supply side of the economy (the extent to which industries drive economic output by producing goods and services). The growth figures outlined above fall under GDPp. The overall figure of ‑1,2%, reflecting the change in GDPp, continues to be the headline growth rate.

GDPe, on the other hand, is a measure of the demand side of the economy, the amount of money that is used to buy the goods and services that are produced. GDPe includes data on household and government spending, capital investment, and exports (minus imports). Stats SA has taken over the responsibility for calculating GDPe from the South African Reserve Bank.

The demand side of the economy: falling exports drive down overall expenditure

So what are the results for GDPe? GDPe fell by 0,7% quarter-on-quarter, joining GDPp growth in negative territory. Demand for goods and services declined for all components of GDPe with the exception of government, which experienced 1% quarter-on-quarter increase in expenditure. Exports of goods and services declined 7,1% and contributed most (-2,2 percentage points) to the overall decline.

Download the complete GDP publication here.