South Africa is again exposed to the signals that triggered a sharp contraction of its GDP in Q119 (-0.8% q/q): A shrinking manufacturing output and power blackouts. The manufacturing PMI was in free fall during the last two months: At 41.6 in September, this is the lowest level since August 2009. Hard data is consistent, since the manufacturing output was in contraction during the last 3 months (to August), a pattern last seen in 2017. Despite recent Eurobond issuance (USD 5bn), power remains a key problem. A shortage of cash was among the key issues, but too low investment and a depleted output capacity are also key bottlenecks that still await a solution. As a result, a new blackout period is expected during the next weeks. Against this background, the fiscal deficit is deteriorating fast, from -4.2% of GDP in 2018 to an expected -6.5% in 2019. It should help to avoid a negative growth figure in 2019 (+0.5%), but the outlook should again deteriorate in 2020 (+0%).
