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By Arabile Gumede and Thembisile Dzonzi
(Bloomberg) — South African economic growth accelerated for the first year in four in 2017 as agricultural output surged following a recovery in output after the worst drought in more than a century.
Gross domestic product expanded 1.3 percent last year, more than National Treasury’s forecast of 1 percent. 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.
The economy grew an annualized 3.1 percent in the fourth quarter from the previous three months compared with a revised 2.3 percent expansion in the prior quarter, Pretoria-based Statistics South Africa said in a statement. The median estimate of 14 economists surveyed by Bloomberg was for growth of 1.8 percent.
The improved quarterly performance came as agricultural output rallied 38 percent from the prior three months and mining production fell 4.4 percent. Fixed capital formation improved 7.4 percent, the first expansion in a year.
Nhlanhla Nene showed character and integrity during trying times he faced while axed as the Minister, instead of mourning and crying foul he maintained professionalism waiting for his destiny to call again…Welcome Mr Finance Minister into your rightful place #CabinetReshuffle
— Ndzavi Derrick .CBA (@NdzaviDerrick) February 26, 2018
While the growth rate hasn’t exceeded 2 percent since 2013, prospects for this year are looking up. Business confidence climbed to the strongest since October 2015 in January, having fallen to a three-decade low in August. The purchasing managers’ index was above 50 in February, indicating expansion in the manufacturing industry.
South Africa’s economy could expand 1.5 percent this year, the National Treasury said on Feb. 21. Growth will probably accelerate to 2.1 percent in 2020 as measures aimed at creating policy certainty and attracting investment pay off, it said.
The National Treasury will probably raise these projections in the October mid-term budget as South Africa overcomes governance and financial problems, Finance Minister Nhlanhla Nene said March 5.
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