(Bloomberg) -- South Africa’s economy unexpectedly contracted in the third quarter, after the agriculture sector slumped the most in at least three decades.
Gross domestic product shrank 0.3% in the three months through September, Statistics South Africa said in a report released in the capital, Pretoria, on Tuesday. That compared with revised growth of 0.3% in the prior period. None of the nine economists in a Bloomberg survey expected the contraction.
For the nine months through September, an early indicator of where full-year growth may land, GDP expanded 0.4% from last year.
The rand pared its gains to trade little changed against the dollar, and yields on government bonds remained lower after the data’s release. Traders added bets on interest-rate cuts, with forward-rate agreements pricing in 73 basis points of reductions over the next 12 months, compared with 69 basis points before the GDP data.
Agriculture recorded its second consecutive decline, falling by 28.8% in the third quarter. It was the largest negative contributor, pulling GDP growth down by 0.7 of a percentage point, the statistics agency said.
“I would suspect that the market analysts maybe did not factor in such a decline in the agriculture industry because it did not have short-term indicators that point to this decline,” said Joe de Beer, deputy director-general of economic statistics at the agency. “If we for a moment ignore the agriculture contraction,” the economy would have grown 0.4%, he said.
An El Niño-induced drought heavily weighed on South Africa’s 2023-24 summer crop production, with lingering animal diseases exacerbating the impact on the sector, Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, said in a note.
Last month, the Department of Agriculture agreed to issue import permits for genetically engineered white and yellow corn from the US after the drought caused a 23% drop in domestic production.
The contraction is a blow to President Cyril Ramaphosa and his coalition partners’ objective of making growth and job creation a top priority. South Africa’s economic expansion has averaged less than 1% over the past decade, outpaced by population growth.
--With assistance from Simbarashe Gumbo and Robert Brand.
(Updates with comment from Agricultural Business Chamber in paragraph seven)
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