South African President Cyril Ramaphosa unexpectedly suffered the same false start as his predecessor nine years ago: a recession in his first six months in office.
The economy contracted an annualised 0.7 per cent in the second quarter from the previous three months, pushing Africa's most-industrialised economy into its first recession in almost a decade. The rand, which has already been under pressure in recent weeks as part of a rout in emerging-market currencies, extended declines after the data.
The news is a setback to the new president, whose ascent in the wake of the corruption-plagued era of Jacob Zuma initially aroused such optimism that it was dubbed "Ramaphoria."
Slack farming output and soft consumer spending have put pressure on the economy. Ramaphosa's rise to power since December initially boosted sentiment and the rand following Zuma's tenure of almost nine years. That optimism has faded as structural reforms weren't implemented fast enough and global trade wars and turmoil in other emerging markets such as Argentina and Turkey soured sentiment.
"This economy remains in the doldrums, that we are in desperate need for policy certainty and structural reform to get us onto a growth path," Elize Kruger, an economist at Paarl, South Africa-based NKC African Economics, said by phone. "This type of environment is difficult for job creation. We'll get stuck in our low-growth term if we can't get out of this."
The rand weakened as much as 2.6 per cent against the greenback and was 2.3 per cent down at 15.2088 per dollar by 2:03 p.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 rose 18 basis points to 9.18 per cent, the highest level since before Ramaphosa became leader of the ruling African National Congress.
A contraction for the fourth quarter of 2016 was later revised to show growth, resulting in this being the first recession since the financial crisis of 2009.
Highlights from the release include the following:
• Agriculture declined the most, recording an annualized 29.2 per cent contraction
• Mining production expanded 4.9 per cent from the previous quarter
• Manufacturing shrank 0.3 per cent
• Trade contracted 1.9 per cent