South Africa Goes Into A Recession

South Africa is has a history of violence but is also a very wealthy nation due to her holdings of natural resources and her position within the BRICS (Brazil, Russia, India, China, South Africa) bloc. However, due to a series of reasons, including the rise of identity politics with nationalism and decaying infrastructure, South Africa is now said to have been pushed into having a recession, which comes at a time when the COVID-19 coronavirus is being blamed for causing economies to tumble and production lines to shut down as is being reported by AP News.

The South African economy shrank by 1.4% in the fourth quarter of 2019 from the previous three-month period, after contracting by 0.8% in the third quarter, according to Stats SA. A recession is commonly defined as two consecutive quarters of economic decline.

South Africa’s nationwide power blackouts are blamed for the larger than expected decline in the fourth quarter. The state-owned power utility, Eskom, has been unable to meet demand and has had to implement rotating cuts in electricity to residences, factories, mines and businesses.

Eskom’s “inability to meet demand on a sustained basis is a key reason for South Africa’s very slow growth record of just 0.9% a year in 2015 19,” said Pat Thaker, the Economist Intelligence Unit’s regional director for the Middle East and Africa. “Eskom is, in effect, capping South Africa’s growth potential and preventing a significant rebound.” (source)

South Africa is the 35th largest economy in the world, but the second largest in Africa after Nigeria. Certainly there are larger economies, but she wields a significant position within Africa, and instability within her could suggest further instability in other world economies. She is also a major producer of precious metals, including platinum, silver, gold, chromium, and certain very specific rare earth minerals and metals used in the production of supercomputers. These markets inevitably will be affected by a recession in the nation, and could have secondary influence in helping to bring about the conditions for a recession in other nations reliant on her for a consistent and cheap source of raw materials.

It will be important to watch the economic situation, as it will have definitive political impacts for the 2020 election and world elections that will only be amplified by the current and likely growing migration crisis into Europe from the Middle East and potentially also Africa.

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