Structural weaknesses in the economy, a severe drought in the summer rainfall areas, internal social and labour unrest, problems encountered in the political negotiation process, and relatively weak economic growth in most of the major industrialised countries, prolonged the downward movementineconomic activity in South Africa. The recession, which started inMarch1989, has therefore now become the longest downward phase of the business cycle in the post-warperiod, and inthiscentury it was surpassed inlengthonly by the recession of 1904-1908 (which lasted for about four years).Althoughthe downturnineconomic activity was initiallyrelativelymild, its long duration caused it to become very severe. During the downward phase non-agricultural domestic product decreased for six consecutive quarters and approximately 160 000 job opportunities werelost.Total real gross domestic product decreased by~per cent in both 1990 and 1991, and a further decline is projected for 1992.As economic activities continued to decline, the decrease in domestic production became more widespread throughout the economy. Initially only the real output of manufacturing and mining contracted; in the first half of 1992, however, decreases were registered in the value added by most of the major sectors such as agriculture, non-gold-mining, manufacturing, construction and wholesale and retail trade. These declines were countered somewhat by asmallrise in gold production and in the real value added of some of the tertiary sectors.Theinitialmildness of the economic downswing was supported by a firm demand for consumer goods and services, while real gross domestic investment decreased sharply. From the beginning of 1991 substantial cutbacks in households' real outlays on durable and semi-durable goods contributed to the severity of the cyclical downturn. As real personal disposable income began to decline, even real consumption expenditure on non-durable goods and on services contracted moderately. Uncertainties created by the retrenchment of a large number of employees and the faltering political negotiation process led to a rise in precautionary savings and a lower propensity to consume. The high level and cost of consumer debt together with the erosion of thenetwealth of many persons also furthered a moderation of households' consumption expenditure. The resulting decrease in total private consumption expenditurein1991and the first half of 1992 was countered somewhat by a continued buoyancy in real government outlays on consumer goods and services.The rate of decrease in real gross domesticfixedinvestmentaccelerated during 1991 andthefirst half of 1992. The further decreaseinfixed investment was prevalent in all three major institutional sectors,i.e.in theinvestmentof public authorities, public corporations and the privatesector.Various factors were probablyresponsiblefor the poor investment performance, including theexcessproduction capacity related to the lowlevelof domestic economic activity, the lowinternationaldemand andslowdownin world trade, relatively high nominal interest rates, rationalisation programmesintroducedby many enterprises to cut production costs, the completion of the Mossgas project and the drought experienced in a large part of the country. Perhaps even more important than these economic developments, was the effect on domestic investment of uncertainties created by the political negotiation process, strikes, work stoppages and other socio-political problems. two years. The depletion of inventories, however, slowed down markedly during the second half of 1991 and therefore moderated the economic decline. In the first quarter of 1992 an apparent involuntary build-up of inventories was recorded, probably reflecting a lower than expected domestic and export demand. This was followed again by a moderate disinvestment in inventories in the second quarter of 1992. Inventory investment, which had turned negative inthethird quarter of 1989, declined throughout the nexttwo years. The depletion of inventories, however, slowed down markedly dur