First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Economic turnaround in sight: Key growth driver lurking...

Defend Truth


Economic turnaround in sight: Key growth driver lurking in South Africa’s 2020 GDP figures


Dr Roelof Botha is economic adviser to the Optimum Investment Group.

The damage inflicted on the economy in 2020 as a result of the Covid-19 pandemic turned out to be less severe than generally anticipated.

According to Stats SA, South Africa managed to produce goods and services valued at close to R5-trillion during 2020 (at current prices), which was only 2% less than the GDP recorded during 2019.

Unfortunately, inflation swelled the negative growth rate to 7%, which is a bit of a mystery when considering the sharp decline in the consumer price index in 2020 to a level of 3.3%.

Sterling second-half performance 

Thanks to a remarkably swift recovery of economic activity in the third quarter (an 18% quarter-on-quarter nominal growth rate) and a further solid performance in the fourth quarter (6.8% growth), the economy managed to produce 3% more between October and December 2020 than in the same period a year earlier (at current prices).

Economic turnaround in sight

Closer scrutiny of the latest GDP data raises some questions over the accuracy of the value added by the mining sector. According to Stats SA, the latter amounted to R373-billion in 2020, almost 1% lower than the 2019 figure.

In sharp contrast, the value of South Africa’s mineral sales in 2020 amounted to R610-billion, more than 10% higher than in 2019 and a new all-time record. Furthermore, the gross operating surplus of the mining sector also increased by 3.4% in 2020 (at current prices). 

Mining is the only sector next to agriculture to have managed this feat in the “year of the pandemic”.

From a demand-side perspective, it is clear that the lockdown regulations took a heavy toll on consumption expenditure related to alcoholic beverages, restaurants, transport and recreation.

However, consumers raised their expenditure levels on the categories for food, communication and education. From a significantly lower base induced by the pandemic, the former group of expenditure categories should recover handsomely during 2021.

As expected, fixed investment in new productive capacity (capital formation) fared poorly in 2020, mainly as a result of the unprecedented level of uncertainty surrounding the ultimate impact and duration of the pandemic. 

In the absence of a third wave of new Covid-19 infections, the decline of 30% in the cost of capital (as measured against the prime rate) will undoubtedly incentivise a recovery of capital formation during 2021.

The stand-out feature of the GDP data for 2020, however, is the dramatic depletion of inventories in the economy, a trend that also occurred in several other countries. An increase in the value of inventories represents higher capital formation and vice versa.

The pandemic has caused the worst ever decline in South Africa’s inventory levels — R165-billion in 2020. This figure is more than 10 times higher than in 2019, when inventories declined by R16-billion.

A further perspective on the significance of this decline is provided by the change to inventories during the 10 years between 2010 and 2019, when it amounted to a positive figure of almost R7-billion per annum — not very significant relative to GDP.

Indeed, if inventories had recorded zero change between 2019 and 2020 (a realistic scenario in the absence of a so-called “black swan” event), South Africa’s GDP would have increased by 1.2% in 2020, instead of decreasing by 2% (in nominal terms).

Significant growth driver 

Herein lies an economic growth driver that will supplement the lowest interest rate environment in 50 years, namely the inevitability of a reversal of fortunes for inventory build-up. 

When other growth drivers are added, such as the country’s new infrastructure drive, public sector job creation programmes and signs of recovery in construction activity (the most labour intensive sector in the economy), it becomes clear that a 5% real growth rate in 2021 is well within reach.

President Ramaphosa and his team assisting the process of economic reforms and enhanced corporate governance in the public sector will be elated by the latest GDP data, as these efforts will be reinforced by higher economic growth and job creation.

The two factions in the ANC remain at each other’s throats and, unfortunately, the one represented mainly by people accused of corruption and State Capture still has many sympathisers within the party’s ranks.

A return to high economic growth will swell fiscal revenues and assist in expediting the government’s recovery and reconstruction plan, including the extension of a basic income grant to the unemployed. This should serve to silence some of Ramaphosa’s fiercest critics. DM


"Information pertaining to Covid-19, vaccines, how to control the spread of the virus and potential treatments is ever-changing. Under the South African Disaster Management Act Regulation 11(5)(c) it is prohibited to publish information through any medium with the intention to deceive people on government measures to address COVID-19. We are therefore disabling the comment section on this article in order to protect both the commenting member and ourselves from potential liability. Should you have additional information that you think we should know, please email [email protected]"

Please peer review 3 community comments before your comment can be posted