South African Economy Is in Recession, Kenya Is Next

South African Economy Is in Recession, Kenya Is Next

Data released on Tuesday show that South Africa entered into its second recession in two years after dismal perfomance in 2019, as agriculture, transport and construction contracted.

“The economy is in recession again. That is two consecutive quarters of contraction, after being in recession in the first two quarters of 2018,” Joe de Beer, Stats SA’s deputy director-general for economic statistics, told reporters

Statistics South Africa (Stats SA) said the economy shrank 1.4% in the fourth quarter, following a revised 0.8% contraction in the third quarter.

South Africa has struggled to rise from an economic slump in the two years since Cyril Ramaphosa became president. South Africa previously went into recession in 2008/2009 and then again in 2018.

Agriculture was the main drag on growth in S.A in 2019 decreasing by 6.9pc, closely followed by construction, mining 1.9pc and manufacturing. In Kenya Agriculture is key to the economy, contributing 26pc of the Gross Domestic Product (GDP) and another 27pc of GDP indirectly through linkages with other sectors. however, Agricultural productivity shrank by 3.2pc on the back of delayed long rains last year, dipping its contribution to the GDP.

Further, the government has spent less than 1.5pc of its budget on agriculture.

Invasion of the fall army worm in the maize belt of the Rift Valley, the failure of the fertilizer subsidy programme due to procurement issues, Intense drought, torrential rains, and now a plague of locusts are hugely eating and denting the ‘growing’ Kenyan economy.

The Ministry of Finance states in its fiscal policy statement for the year 2020 that the recent locust invasion is a further threat to agricultural production.

The Kenyan construction industry is taking a major hit from indefinite delayed shipments of important construction products. Most factories in China have been on lock down since January due to the coronavirus (COVID-19). The manufacturing sector contribution remains below 10 pc, oscillating at 7.7pc in 2018.

President Uhuru Kenyatta’s Big Four agenda has also failed to catapult the sectors contribution to the economy. Kenya’s exports have also been on a steady decline over the past decade. Exports as a share of GDP declined from 14pc in 2011 to a mere 7pc in 2018.

Kenya is merely a Sh10 trillion economy with 44.7 out of 47.6 million poor people. Data by the International Monetary Fund (IMF) compares poorly with a grim reality of millions living in a very difficult financial environment. The paradox of a rich country with poor people.

CBK recently said Kenyans can not eat the GDP, what you should focus on is the Human Development Index (HDI). HDI takes into account indicators like the happiness of a population, life expectancy, standards of living and levels of knowledge, Kenya is performing very poorly.