Concern over SA's shrinking economy

Figures show the economy experienced its first contraction since 2009, dropping 0.6%.

FILE: Recent figures show the economy experienced its first contraction since 2009, suffering a drop of 0.6 percent. Picture: Sebabatso Mosamo/EWN

CAPE TOWN - South African Chamber of Commerce and Industry (SACCI) has expressed concern over the country's shrinking economy.

Gross domestic product (GDP) data released on Tuesday shows the economy contracted by 0.6 percent during the first quarter of this year, as a strike on the platinum belt continues to hamper mining output.

The Association of Mineworkers and Construction Union (Amcu) led industrial action has entered its fifth month, with workers sticking to their demand for a R12,500 basic salary.

The chamber's Peggy Drodskie says the protracted industrial action is affecting growth.

"We're just hoping, very sincerely, that the new cabinet is going to be able to address some of the very serious issues that we face, which are actually causing a dip in the GDP."

Though many expected a negative trend, the average prediction was that the country would only see a 0,1 percent drop.

The slump was bigger than analysts expected.

Concern is likely to mount now that a full blown recession could be on its way should the next quarter experience further damage.

At the same time, mining experts say investors are looking for policy certainty and more leadership from government.

They are expected to adopt a wait-and-see attitude towards new Mineral Resources Minister Ngoako Ramatlhodi.

Ramatlhodi says he has already started consulting business and labour in the mining sector.

Mining specialist Olivier Barbeau says government needs to be clear about its policies.

"Investors want political certainty on how the government views mining assets, nationalisation and state involvement in the sector."

Law firm Webber Wentzel mining head Peter Leon agrees.

"On top of that list would be the need to create certainty and stability in the sector and to create the right environment for investing. At the end of the day, mining is a long term capital intensive business."

Ramatlhodi wants government, business and labour pulling in one direction.

Leon says what the sector needs now is certainty.

"It's creating that environment that is conducive to long term investment, which this country very much needs."

Barbeau says levels of trust between the government and business is at an all time low.

"The most important thing is to clear up the dialogue between government and the mining industry. That whole communication train is not great at the moment."

With the long running platinum miners' strike still unresolved and controversial new mining legislation under fire, Ramatlhodi will be closely watched as he navigates through the coming days and weeks.