South Africa Avoids Recession With Modest Growth in Second Quarter

The South African economy narrowly dodged recession by growing 0.6% in the second quarter over a year ago, the country's statistics authority said Tuesday.

The latest quarterly assessment of South Africa, the continent's most advanced economy, offered little good news even as growth elsewhere in Africa is accelerating.

The pain in the country's key mining sector, after a five-month strike in the platinum zone earlier this year, has rippled through the economy. The industry's contribution to the economy declined by 9.4% in the second quarter, having shrunk by 24.7% in the first quarter.

Meanwhile, manufacturing—another critical sector accounting for some 15% of the South Africa's economy—also continued to slip. In the second quarter, its contribution contracted by 2.1%.

The expansion in second-quarter gross domestic product indicated that Africa's second-largest economy is staging an extremely fragile recovery. In the first quarter, the South African economy shrank 0.6%. An economy is commonly considered in recession after shrinking for two consecutive quarters.

Even though the latest quarter registered growth, the figure was well below consensus forecasts of 1.3%. The pace of expansion is also significantly slower than average growth in Africa—the International Monetary Fund has projected growth of 5.4% for the sub-Saharan region of 46 countries. South Africa's sluggish economy is also failing to create jobs for the country's residents. The unemployment rate was at 25.5% in the second quarter, hovering around the level where it has been for years.

"The reality is that this economy, since 2009, has performed significantly below trend," said Goolam Ballim, chief economist at Standard Bank. "It begs the question: What's going to drive South Africa towards a more rehabilitated state?"

Mr. Ballim said that, looking ahead, he expected the economy to grow by about 2% throughout 2015.

The key driver behind the modest second-quarter expansion wasn't private or foreign investment but a 2.9% jump in general government spending, data released by the statistics authority showed. The extra state spending in the second quarter included the one-off cost of running South Africa's national election in May, the statistics authority said.