Following the riots that killed some 215 people in ten days, growth will be seriously compromised, according to the Wall Street investment bank JP Morgan. The economy will contract by 3% in the third quarter, as it began to recover gradually from the crisis.
The July riots, following the imprisonment of the former president Jacob Zuma, are the worst thing that could happen to South Africa after the disastrous impact of Covid-19 which caused an economic collapse. Indeed, according to JP Morgan, the third quarter will see a decline of 3% of the GDP of the continent’s now third-largest economy, after Egypt overtook it last year.
Following the imprisonment of Jacob Zuma, riots broke out in several regions of the Rainbow Nation, which still has the most industrialized economy on the continent. Hundreds of businesses were completely destroyed in the riots which caused some 215 deaths, to the point where the president Cyril Ramaphosa called them the worst events in post-apartheid South Africa.
This is why the American investment bank revised its forecasts for the country, because “the wave of violence and looting rocked Gauteng and Kwazulu Natal (KZN), two provinces which represent more than half of the GDP of South Africa, ”Sonja Keller said in a note to clients of JP Morgan.
“The disruption in the supply chain is also increasingly evident, as the port branch of the state-owned logistics company, Transnet, and the country’s largest crude oil refinery, Sapref, have temporarily suspended operations in KwaZulu Natal, risking to curb exports of fresh produce, ”she continues.
For the year, growth should now stand at 4.5% against 4.9% in the previous forecast of JP Morgan which remains quite opimistic, since the Deutsche Bank had estimated that the riots could reduce South Africa’s economic growth by 0.8% this year.