Growth in the real gross value added (GVA) by the primary sector accelerated further in the second quarter of 2021, even though real mining output increased at a slower pace. Mining production continued to be supported by higher international commodity prices and improved global economic activity. The real GVA by the agricultural sector increased at a brisk pace in the second quarter of 2021 after contracting in the first quarter. Agricultural output was boosted by the increased production of field crops, with the most recent commercial maize crop estimate for the 2020/21 season being 6.6% more than the final crop for the 2019/20 season. The production of horticultural and animal products also increased in the second quarter of 2021.

Real economic activity in the secondary sector contracted in the second quarter of 2021 following an increase in the previous quarter, as real GVA by both the manufacturing and construction sectors contracted. By contrast, real GVA by the sector supplying electricity, gas and water increased in the second quarter of 2021 after contracting in the previous quarter. Production volumes declined across a broad spectrum of manufacturing subsectors in the second quarter, with the petroleum industry severely affected by the closure of some crude oil refineries. Decreases in residential and non-residential building activity as well as in civil construction activity weighed on output in the construction sector in the second quarter, with the sector still severely affected by the COVID-19 pandemic and weak investor sentiment. The volume of electricity produced and consumed both increased in the second quarter of 2021, reflecting improved capacity at Eskom’s power plants as the sixth and final unit at Medupi Power Station achieved commercial operation status.

The real GVA by the tertiary sector expanded at a faster pace in the second quarter of 2021, largely due to a marked rebound in the real output of the transport, storage and communication sector as activity in road freight transportation and transport services increased notably. The ongoing commodity price boom further supported freight transport of mining and agricultural products. Real output of the commerce sector increased further in the second quarter of 2021 and edged closer to pre-lockdown levels, as activity in the wholesale, retail and motor trade as well as in the tourism and accommodation subsectors increased. By contrast, real GVA by the finance, insurance, real estate and business services sector contracted over the period as activity declined in the finance and insurance subsectors, with reduced banking activity lowering monetary intermediation output.

Growth in real gross domestic expenditure (GDE) decelerated sharply to a rate of 0.2% (0.9% annualised) in the second quarter of 2021 following a significant increase of 2.4% (9.9% annualised) in the first quarter, mainly due to a faster pace of de-accumulation in real inventory holdings. Growth in real final consumption expenditure by households moderated, while real gross fixed capital formation reverted to an expansion from a contraction in the first quarter. Real net exports contributed the most to overall economic growth in the second quarter of 2021 as real exports increased at a faster pace than real imports.

Growth in real final consumption expenditure by households almost halved to 2.1% in the second quarter of 2021, consistent with slower growth in the real disposable income of households. Growth in real outlays on durable and semi-durable goods moderated, while real spending on services contracted. Although purchases of personal transport equipment increased at a faster pace, real spending on almost all the other durable goods subsectors declined in the second quarter. Household expenditure on non-durable goods increased at a faster pace, largely due to increased spending on food, beverages and tobacco, and petroleum products.

The ratio of household debt to disposable income decreased slightly from 67.1% in the first quarter of 2021 to 66.7% in the second quarter, as the quarter-to-quarter increase in nominal disposable income exceeded that in household debt. Households’ cost of servicing debt relative to nominal disposable income decreased slightly to 7.5% in the second quarter of 2021, from 7.6% in the first quarter.

Households’ net wealth increased in the second quarter of 2021 as the increase in total assets outweighed that in total liabilities. The value of assets was supported by an increase in equity holdings in particular, as domestic share prices increased further. The FTSE/JSE All-Share Index (Alsi) increased for seven consecutive months up to May 2021, before temporarily receding in June and then surging to a new all-time high in mid-August. Subsequently, share prices tapered off up to mid-September.

Real gross fixed capital formation increased in the second quarter of 2021 after contracting in the first quarter, but remained well below its pre-lockdown level. Private business enterprises increased capital outlays in the second quarter, while public corporations and general government reduced capital spending amid continued financial strain. Increased investment in especially transport equipment as well as in machinery and other equipment outweighed lower investment in all construction-related asset categories in the second quarter of 2021.

The post-lockdown recovery in employment has thus far lagged the recovery in economic activity. Total household-surveyed employment decreased further in the second quarter of 2021 as the decline in formal sector employment outweighed increases in the informal and agricultural sectors as well as in private households. The number of unemployed persons increased notably to 7.8 million in the second quarter of 2021, reflecting increased labour market participation. As a result, the official unemployment rate increased further to a new record high of 34.4% in the second quarter of 2021. With the number of discouraged work seekers increasing by 3.3 million, the expanded unemployment rate – which also includes those who did not search for work due to other reasons – increased to 44.4% over the same period.

Growth in nominal remuneration per worker in the formal non-agricultural sector accelerated further from 1.5% in the fourth quarter of 2020 to 3.7% in the first quarter of 2021. The acceleration occurred in the private sector, as wage growth per worker was supported by the return to work of furloughed workers as well as an increase in bonus and overtime payments. By contrast, growth in public sector remuneration per worker contracted at a faster pace, largely due to the non-implementation of the annual public sector wage increase in 2020 to curtail government expenditure. Overall formal non-agricultural remuneration per worker still contracted in real terms in the first quarter of 2021, albeit at a slower pace.

Labour productivity growth in the formal non-agricultural sector of the economy accelerated from an upwardly revised 2.3% in the fourth quarter of 2020 to 3.1% in the first quarter of 2021, as the rebound in output outweighed that in employment on a year-on-year basis. Conversely, the change in nominal unit labour cost in the formal non-agricultural sector reverted from a year-on-year decrease of 0.8% in the fourth quarter of 2020 to a slight increase of 0.6% in the first quarter of 2021, as total remuneration recovered at a faster pace than output.

Most measures of producer price inflation have accelerated sharply thus far in 2021. In particular, intermediate manufactured producer price inflation accelerated markedly to 17.6% in July 2021, reflecting higher international commodity prices and the shortages of many raw materials. Headline consumer price inflation accelerated from a 16-year low of 2.1% in May 2020 to 5.2% a year later, before slowing to 4.6% in July 2021. The acceleration reflected base effects from the price imputations of some items employed by Statistics South Africa (Stats SA) from April 2020 and, more recently, increases in fuel, food and electricity prices. When excluding these three items from the consumer price index, core inflation was muted at 3.0% in July 2021.

South Africa’s trade surplus with the rest of the world widened substantially to a record high in the second quarter of 2021. The value of net gold and merchandise exports increased to a new all-time high and outpaced the increase in the value of imports. The higher value of exported goods reflected a marked increase in prices, along with a lesser increase in volumes, while the increase in imports mostly reflected higher prices. This resulted in a further improvement in South Africa’s terms of trade in the second quarter of 2021.

The value of mining exports increased strongly in the second quarter of 2021, boosted by especially platinum group metals, which continued to benefit from the surge in the prices of these commodities. Manufacturing and agricultural exports also increased over this period. Mining and agricultural products supported the increase in the total value of merchandise imports in the second quarter of 2021. Mining imports reflected continued demand for mineral products, particularly refined petroleum products, as some local refineries shut down for maintenance and others closed permanently. Imports of articles of iron and steel also increased notably as the domestic steel shortage experienced since the start of the COVID-19 pandemic continued. Manufacturing imports decreased in the second quarter of 2021 as the import values of machinery and electrical equipment as well as vehicles and transport equipment declined, with the latter reflecting the global semiconductor shortage, among other factors.

The significantly larger trade surplus more than compensated for the much larger shortfall on the services, income and current transfer account, resulting in the surplus on the current account of the balance of payments widening further from 4.3% of GDP in the first quarter of 2021 to 5.6% of GDP in the second quarter. The shortfall on the income account increased substantially in the second quarter of 2021 as gross dividend payments rebounded following improved profits in some sectors, particularly mining, while gross dividend receipts decreased sharply.

The net outflow of capital on South Africa’s financial account of the balance of payments increased to R109.6 billion in the second quarter of 2021 following an outflow of R64.7 billion in the first quarter. On a net basis, only direct investment recorded an inflow, while portfolio investment, financial derivatives, other investment and reserve assets all registered outflows. Direct investment liabilities increased as non-resident parent entities increased their equity investment in domestic subsidiaries, among other things. Portfolio investment outflows mainly reflected a further surge in the acquisition of foreign portfolio assets by South African residents.

South Africa’s total external debt decreased from US$170.4 billion at the end of December 2020 to US$164.7 billion at the end of March 2021. This was mainly due to a decrease in foreign currency-denominated external debt as long-term loans of the private non-banking sector decreased, and due to the redemption of an international bond by the public sector. Rand-denominated external debt also decreased slightly over the period.

South Africa’s positive net international investment position (IIP) decreased further in the three months to the end of March 2021 as the value of foreign liabilities increased more than that of foreign assets. The higher value of foreign liabilities reflected increased direct and portfolio investment, which was boosted by the marked increase in the share prices of companies listed on the JSE Limited in the first quarter of 2021.

The nominal effective exchange rate (NEER) of the rand increased further by 2.7% in the second quarter of 2021, and by 18.4% between the end of March 2020 and the end of June 2021 as it recovered after the outbreak of COVID-19. After increasing in April and May 2021, the NEER declined in June following a more hawkish monetary policy stance by the United States (US) that raised expectations of a faster-than-expected adjustment in interest rates, which negatively affected demand for emerging market assets. The NEER then increased up to 10 September 2021, despite the domestic civil unrest in July as well as rising concerns about the impact of new COVID-19 outbreaks on the global and domestic economic recovery. 

South African government bond yields decreased from the beginning of April 2021 up to mid-June, reflecting cumulative net purchases of domestic bonds by non-residents and a decline in US government bond yields following indications that interest rates in the US will probably not be raised in the short-term. The subsequent slight increase in South African bond yields up to mid-September 2021 occurred against the backdrop of the domestic civil unrest in July, non-resident net sales of domestic bonds in June and July, and the depreciation in the exchange value of the rand.

The strong growth in the broadly defined money supply (M3) in the first half of 2020 had slowed to a near standstill by mid-2021. The sharp deceleration partly reflected base effects as deposit balances were accumulated a year earlier amid the uncertainty during the initial COVID-19 lockdown period. The slowdown in deposit growth of the corporate sector was driven by a marked contraction in the deposit holdings of financial companies as bank deposits became less attractive amid the low interest rate environment. Growth in household deposits slowed to a lesser extent over this period.

Year-on-year growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated somewhat in the four months to July 2021, but remained subdued. Credit extended to companies contracted on a year-on-year basis over this period, largely reflecting the decline in general loans and slower growth in mortgage advances. By contrast, credit extended to the household sector has accelerated gradually thus far in 2021, as the low interest rate environment stimulated some credit demand and progressively less restrictive lockdown regulations revived consumer demand. Mortgage advances to households led the acceleration alongside increased demand for residential property.

Funding by the public sector in the domestic primary bond market has declined thus far in 2021, as higher commodity price-induced tax collections have reduced national government’s borrowing requirement. The decline reflected reduced net issues by national government as well as net redemptions by public corporations and local government. By contrast, private sector funding has been buoyant in the first eight months of 2021, with banks continuing to dominate net bond issuance.

The preliminary non-financial public sector borrowing requirement decreased significantly in the first quarter of fiscal 2021/22 compared with the same period in the previous fiscal year. This largely reflected the much smaller cash deficit of national government following significantly higher revenue collections along with a moderate increase in expenditure. The deficits of the social security funds and the non-financial public enterprises and corporations also decreased significantly over this period.

Although national government revenue surpassed originally budgeted estimates across a broad spectrum of tax categories in the first quarter of fiscal 2021/22, the increase in corporate income tax collection was most pronounced, driven by mining companies in particular. This lowered national government’s cash book deficit significantly and reduced the need for funding, with the funding activities of national government substantially increasing its overall available cash balances. National government’s gross loan debt increased to R4 051 billion as at 30 June 2021, or 68.8% of GDP.

Notice regarding the revision of South Africa’s national accounts statistics

On 25 August 2021, Statistics South Africa (Stats SA) published the revised benchmarked estimates of gross domestic product (GDP) for the period from the first quarter of 1993 to the fourth quarter of 2020. This was followed on 7 September 2021 by the publishing of the revised GDP for the first quarter of 2021 and the GDP for the second quarter of 2021.

The South African Reserve Bank’s (SARB) media notice of Thursday, 26 August 2021 envisaged that the September 2021 edition of the Quarterly Bulletin would include the national accounts balanced production, expenditure and income statistics from the first quarter of 1993, and would be available on the SARB website with the release of the September 2021 Quarterly Bulletin.

However, due to the proximity of the release of the September 2021 Quarterly Bulletin to the Stats SA releases and the extent of the further revisions required to the additional SARB national accounts statistics, the following historical statistics will only be available from the first quarter of 2010, and published on the SARB website with the release of the September 2021 Quarterly Bulletin:

- Financing of gross capital formation: S–132

- Production, distribution and accumulation accounts of South Africa: S–133 to S–138

- Current income and saving: selected items: S–139

- Key information: S–156; S–157; S–158

These revised statistics from the first quarter of 1993 to the fourth quarter of 2009 will be released on the SARB website on 21 October 2021.

The revised statistics from 1946 to the fourth quarter of 1992 will only be available on the SARB website on 15 December 2021 with the release of the December 2021 Quarterly Bulletin, following the backward linking of the timeseries.