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South Africa sees contraction of capital inflows

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Staff writer ▼ | June 15, 2016
South Africa
Economy in Africa   GDP in South Africa contracted 1.2 percent

Capital inflows into South Africa shrank from 53.5 billion rand ($3.5 billion) in the fourth quarter of 2015 to 27.6 billion rand in the first quarter of 2016, the country's central bank said.

This coupled with the contraction of 1.2 percent in the country's GDP in the first quarter of 2016, according to data released by the South African Reserve Bank (SARB).

Releasing the data in Pretoria, SARB Head of Economic Reviews and Statistics, Johan van den Heever said this was the first disappointing outcome since 2009 during the global financial crisis.

The weak economic growth was as a result of the weak global demand for commodities, falling commodity prices and poor performance on the agricultural sector because of the drought, Van de Heever said.

In the first quarter of this year, production of iron ore and platinum declined and the mining sector's output declined significantly, the data showed.

Van den Heever said, "The commodity prices, of course, were not juicy, although they were propped up a bit in rand terms with the exchange rate being relatively weak. One of the explanations for this rather sharp decline is that previously people were still buying, pre-empting that prices would go up quite a bit."

South Africa's trade deficit narrowed to R38 billion rand ($2.47 billion) in the first quarter of 2016 from 41 billion rand $2.67 billion) in the fourth quarter of 2015.

This was caused by the risks associated with political uncertainty in the country, low economic growth, low consumer and business confidence, the SARB said.

The central bank also said the country's current account shortfall in the first quarter of 2016 increased to five percent of gross domestic product (211 billion rand) from 4.6 percent (191 billion rand) in the fourth quarter of 2015.

This was necessitated by the country paying more on dividends for the investors based out of the country than receiving from the investments abroad.


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