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Finance Minister says govt didn't see recession coming

Finance Minister Nhlanhla Nene says he doesn’t think that the latest figures have something to do with the current heated debate around the expropriation of land without compensation.

Finance Minister Nhlanhla Nene. PIcture: GCIS

BEIJING/JOHANNESBURG - Finance Minister Nhlanhla Nene has reacted to South Africa's slide into recession, saying while the government is not entirely surprised, it's disappointed in the numbers.

Earlier on Tuesday, Stats SA announced the economy had contracted by 0.7% in the second quarter following a contraction of 2.6% in the first quarter.

The largest negative contributors to growth in GDP were agriculture, transport and trade.

Speaking in Beijing on the sidelines of the Forum on China-Africa Cooperation, Nene says government didn’t see the technical recession coming.

“We didn’t think we would have the second contraction, we were hoping we would have a moderate recovery.”

But he says government is working on a plan to finalise the structural reform package.

“The reform package that comes out of the Cabinet process is also in the pipeline.”

Nene says he doesn’t think that the latest figures have something to do with the current heated debate around the expropriation of land without compensation but says government can’t deny that the VAT increase and fuel price hikes have had an impact on the numbers.

ECONOMISTS REACT

Economists say the latest gross domestic product (GDP) figures were not expected, with many predicting positive growth.

Economist Azar Jammine explains what a recession means.

“Officially, recessions are defined as situations where the GDP contracts for two conservative quarters, it’s an attempt at trying to describe a situation where things are actually deteriorating.”

Economist Nicky Weimar said: “It’s not really that surprising, we had the monthly numbers that indicated to us that underlying activity remained exceptionally weak in the second quarter. The big question really was around some factors that we didn’t have or don’t have regular monetary statistics on."

(Edited by Winnie Theletsane)

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