"We reported a contraction in the first quarter even with revisions and now in the second quarter with a fall of 0.7%, we are in recession", Statistician-General Risenga Maluleke said in Pretoria on Tuesday.
Stats SA said expenditure on real GDP - which is the spending on goods and services produced in SA, including exports - fell by 0.9% in the second quarter, driven by a 1.3% fall in household spending. South African national currency, the rand, extended declines against the U.S. dollar to more than two percent as government bonds fell after the released data. Weak growth makes it more hard to raise interest rates, leaving the rand even more vulnerable at a time when developing nations are tightening policy. It is a huge blow to President Ramaphosa's controversial reforms.
"This wasn't unexpected, however, as agriculture saw a huge boost past year coming off a low base from the drought to increase around 17%".
While the secondary sector, which is made up of manufacturing, electricity and construction saw some growth, this was damped by a 0.3% contraction in the manufacturing sector. "Low growth impacts on key revenue streams like tax collection, and given the already high strain on our fiscus, this growth figure is concerning". "We do need clarity on land redistribution and mining policy before we will be able to really attract investments, but I believe that the first two quarters of this year are more of a spill-over of ten years of corruption and mismanagement than anything that the new government should take accountability for", he said.More news: Amazon hits $1 trillion market value milestone
This is South Africa's first recession since the 2008/09 global financial crisis.
"In an election year, seeing the economy officially entering a recession for the first time since 2009 is probably the last thing that Ramaphosa wants", he said.
"Today's data will further dent hopes that Cyril Ramaphosa's presidency would lead to a marked turnaround in South Africa's economic fortunes", Tuvey said.