Adding to my general anxieties and things to think about (like why the hell it feels like the beginning of winter not spring and, most recently, do I really need to buy lunch at work?), this Tuesday (04/09/2018) it was announced that SA had sunk into a technical recession. (So no to lunch at work… *packs sandwhich*)

Technically, it’s a recession

If the word ‘technical’ is throwing you off, it simply means that the GDP has failed to grow within two quarter-year assessments. EWN reports that as of Tuesday, the ‘economy had shrunk 0.7% [and] knocked more than 4% off the rand.’ The second quarter showed 3.3% of gross domestic product in comparison to a revised 4.6% in the first quarter. Daily News Editor Aakash Bramdeo explains: ‘The economy shrank by 2.6% during the first three months of this year. In the second quarter our economy declined by 0.7%.’

Oh, okay.

The above is scary, considering South Africa’s economic growth rate has already failed to address our 27% unemployment rate. When you add to this that this is our first recession since the 2009 global financial crisis, we start to understand why people are feeling a bit anxious right now. Just a bit.

What caused it?

Statistics SA reports that a decrease in agricultural production and the decrease in the transport industry’s growth in the last three months, coupled with a decrease in manufacturing activity, are factors: ‘Continued drought conditions in the Western Cape and a severe hailstorm in Mpumalanga, resulting in extensive crop damage, placed additional pressure on production in the second quarter.’ Household expenditure also decreased by 1.3 % in the second quarter of 2018, which was likely a result of the VAT increase announced earlier this year.

On the plus side, the mining sector grew 4.9% in the same time period – but this was not enough to offset the above.

Good news (?)

However, the rand is steadying as of today (07/09/2018), at R15.2200 to the dollar (0.75% stronger). This is in part due to the above data sparking a ‘significant rand demand’, EWN reports.

Furthermore, Fin24 reported this week that, according to economist Roelof Botha, who spoke at the Momentum Consult annual conference, we are not in a recession at all. Roelef reasons that the assessment of economic growth can be done quarterly and annually, and when comparing ‘the second quarter of 2018 to the second quarter of 2017 one can see SA is not in a recession. That is a fact.’

Both Roelef and President Ramaphosa predict the rand will bounce back soon. ‘All these things that are happening now are transitional issues that are going to pass,’ President Ramaphosa said on Thursday, and assured the public that he ‘will be meeting with the business community soon so that we rally everyone together and pull our country out of the situation that we are in.’

While the above may allay worry over the announcement of a recession, the effects the stats and ratings agency Moody’s rating will have on the economy are still a real concern for us.

What this means for you

SA is already struggling under high petrol prices. However the projected 25 cents increase in the fuel price has been delayed with Deputy President David Mabuza announcing a 5 cent ‘temporary reprieve’ today. So there’s that, but the key word in Mabuza’s announcement is ‘temporary’.

In a recession, inflation is inevitable due to the rand being weaker. This will increase the general cost of living, and it might also affect the interest rate, meaning bonds (for example) will also increase.

But before you resign yourself to living off of Two Minute Noodles and Frisco instant coffee, senior economist at the Bureau of Economic Research (BER) Hugo Pienaar, predicts ‘that we will exit the recession in the third quarter’.

So for now, the best thing is to be patient and focus on being prudent by focusing on only the essentials.

Time to pull those purse string real tight. And maybe start packing lunch instead.