South Africa's real GDP grew by 2.5% in the second quarter of this year following a contraction of 0.6% in the previous quarter, ending our second recession in almost a decade, which is welcome.
A closer look at the data shows the uptick was largely underpinned by the positive contribution of the agriculture, forestry and fishing industry.
The sector grew by 33.6% quarter on quarter, following 22.2% quarter-on-quarter growth in the first quarter.
The figures confirm that the agricultural sector is finally out of the woods, but the same cannot be said of manufacturing and, in particular, metals and engineering.
The contribution of manufacturing (including the metals and engineering subcomponents) was modest. The industry grew by 1.5% quarter on quarter after contracting for three consecutive quarters.
However, although the most recent GDP figure has been welcomed, it is no cause for celebration, given that most fundamentals still point to an economy slowly recovering from a low base.
As agriculture and manufacturing see signs of recovery, it is not a time to rest on our laurels.
Concerns that could slow the growth of these sectors in the near term include the decline in agribusinesses' confidence, slow white maize exports and persistent drought in the Western Cape.
The Agbiz/Industrial Development Corporation agribusiness confidence index declined further by two index points in the third quarter to 54 points, after falling by one index point in the second quarter.
A reading above 50 indicates expansion in agribusiness activity, so conditions were still fairly favourable but on a declining trend.
The index typically signals how agricultural GDP could perform in the succeeding quarters.
So a decline in confidence suggests the performance of the sector in coming quarters might not remain as robust.
In addition, water levels in the Western Cape's dams averaged 35% in the week ending September 11, 27% lower than the corresponding period last year, weighing on agribusinesses' confidence and the province's contribution to the agricultural economy.
Similarly, business confidence is lacking in manufacturing. Data released by the Bureau for Economic Research this week showedconfidence remained weak at just 27% in the third quarter, indicating that just over 70% of businesses were unsatisfied with business conditions.
From a metals and engineering perspective, adverse factors in commodity markets, weaker domestic demand from unfavourable commodity prices, rising input costs, lack of gross fixed capital formation and dumping weigh on the sector.
While we celebrate South Africa's exit from recession, we have to continue to consider how this growth can be made sustainable and more inclusive.
One way would be to improve productivity, expand export markets, improve on both productive efficiency and capacity utilisation, and increase capital inflows.
While it is clear that a consistent surge in agriculture and manufacturing's contributions to GDP has helped lift South Africa out of a slump, growth may be relatively weak in coming quarters, especially given thatdomestic political uncertainty will continue to weigh on investments and output.
Ade is chief economist of the Steel and Engineering Industries Federation of Southern Africa, and Sihlobo is head of agribusiness research at the Agricultural Business Chamber
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