South Africa’s economy flourishes after recovering from its worst drought in over a century

The statistics agency of South Africa, Statistics South Africa on Tuesday, revealed that the country’s economy grew more than expected in the fourth quarter of 2017. The economy grew by 3.1 percent after expanding by a revised 2.3 percent in the third quarter. This was largely driven by a recovery in agriculture and trade. However, in 2017, the economy grew by 1.3 percent compared to a revised 0.6 percent in 2016.
“Primary industries had very robust growth and that was emanating from the amount of crops and harvest from agricultural and fisheries sector,” the Statistics South Africa Deputy Director, General Joe de Beer said.
According to the agency, Agricultural output increased for the first time after four years after recovering from the worst drought to hit the country in over 100 years. The agricultural sector recorded the highest growth at 37.5 percent, although the expansion was slower than in the third quarter when the sector grew 41.1 percent. Trade also recovered in the fourth quarter to expand 4.8 percent after falling by 0.1 percent in the third quarter, while manufacturing grew 4.3 percent from 3.7 percent in the previous quarter.
Following the announcement, the rand, which was weak against the US dollar, strengthened more than 0.5 percent to a session high of R11.7575/dollar. The government bonds also strengthened following the news.
According to Bloomberg, Political and policy instability that hurt investor confidence in 2016 continued in 2017, curbing the recovery in Africa’s most-industrialized economy and prompting both S&P Global Ratings and Fitch Ratings Ltd. to cut the nation’s debt to junk. The outlook improved in December when the ruling party elected a new leader who promised to tackle graft.
“Rating agencies are much more likely to focus on structural reforms and the higher growth rate that now looks possible over the coming years. While not downplaying the economy’s still-considerable challenges, this should create a sound base for future improvements in South Africa’s rating,” Standard Chartered Bank’s Chief Africa Economist Razia Khan told Reuters.