South Africa’s Economy Reaches Pre-pandemic Size in Strong Q1

•S’African firm, Southern Sun to exit Nigerian market, to sell hotels for $30.4m

South Africa’s economy grew more than expected in the first quarter, recovering to the level it was before the COVID-19 pandemic thanks to a strong performance by sectors like manufacturing, data from the statistics agency showed.

According to Reuters, the growth trajectory would offer some comfort to South African President Cyril Ramaphosa, who has been under pressure to lift the growth rate.

Gross domestic product grew 1.9 per cent in the first quarter in quarter-on-quarter seasonally adjusted terms and by three per cent year-on-year unadjusted in the first three months of the year.

Economists had predicted 1.2 per cent quarter-on-quarter growth and a 1.7 per cent year-on-year expansion.

Ramaphosa promised sweeping reforms after he took office in 2018, but COVID and persistent electricity cuts have constrained activity and unemployment hit a record high above 35 per cent last year.

Statistics South Africa said manufacturing grew 4.9 per cent quarter-on-quarter, while the trade, catering and accommodation category expanded 3.1 per cent and agriculture, forestry and fishing 0.8 per cent. Mining and quarrying contracted 1.1 per cent.

GDP was 1.15 trillion rand ($75 billion) in the first quarter of 2022, about the same as in the first quarter of 2020, a presentation showed.

The rand was slightly stronger after the figures were released, trading up 0.4 per cent on the day at 15.3800 versus the dollar.

Meanwhile, South African investment company, Southern Sun Africa, has concluded plans to leave Nigeria’s hospitality business amid financial troubles.

The firm is expected to sell off one of its subsidiaries, Southern Sun Hotels in the Ikoyi area of Lagos to offset its debt.

The COVID-19 pandemic had negatively impacted Southern Sun Africa’s revenue and in a bid to cut its losses, the company would sell its 75.55 percent stake in the hotels to Kasada Albatross Holding for $30.4 million. The deal currently awaits the Federal Competition and Consumer Protection Commission (FCCPC) and the Security and Exchange Commission (SEC)’s approval.

Southern Sun Africa chose to save its Mozambique subsidiary with the sale of its business in Nigeria.

The deal would provide the firm with enough cash to offset its $26.6 million debt owed foreign creditors in the Southern African nation.

It will also free Southern Sun Africa from the $12.8 million debt owed by the Ikoyi Hotel, and allows the South African company to restructure its operations following the financial loss induced by the COVID-19 pandemic. It is expected that the name – Southern Sun Ikoyi Hotels – would be changed to Novotel and would be owned by French-owned multinational hospitality conglomerate, Accor Group.