Johannesburg - Major world economies are pulling themselves out of recession, but regional powerhouse South Africa is lagging behind the global recovery, though analysts say the end may be in sight.
South Africa's economy contracted by 3.0% in the second quarter, a less dramatic drop than the first quarter's 6.4% dive.
"The end of the recession is in sight. The degree of decline we saw in the second quarter is better than the previous one," said Jac Laubscher, Sanlam group economist.
He said the economy would continue to stabilise during the rest of the year, but that recovery would only begin in the second half of 2010.
If South Africa is slow to recover, it was also slow to see the effects of the financial turmoil that roiled the world last year.
With sound banks and sober state spending, South Africa weathered the first months of the financial crisis, until reduced global demand finally took a toll on its mining and manufacturing exports - the two biggest sectors of the economy.
South Africa officially entered recession in May, its first in 17 years.
The first quarter decline was driven by a record fall in manufacturing, which shrank 22 percent, hit hard by the slow demand for exports and poor consumer spending.
In the second quarter, manufacturing clawed back but still declined 10.9%.
Mining showed slim growth of 0.3 percentage points in the three months to June, also better than the previous posting but coming off more than a year of heavy declines.
Housing, retail and vehicle sales have plunged since the beginning of the year.
Absa Capital Research predicts that finance, real estate and business services will struggle for the rest of the year.
"Falling company profits and the deflation in domestic house price growth continue to weigh on the industry's ability to contribute a sizable proportion to overall GDP growth," the bank said.
The recession has hammered South Africa's already grim employment outlook, with 724 000 jobs lost between the second quarter last year and the same period this year, according to the government.
The official unemployment rate has barely budged, moving from 23.5% to 23.6%, only because hundreds of thousands of disillusioned workers have stopped looking for jobs and are no longer counted in the workforce.
More than anything, the lost jobs are challenging new President Jacob Zuma, who took office in May on the back of promises to help the poor.
Instead, his first months in office have seen a series of strikes and violent protests in the country's poorest neighbourhoods where residents are demanding basic services like water and electricity.
Citi Group economist Jean Francois said one reason why South Africa's recovery is lagging is that government did not provide stimulus packages to boost ailing industries.
"Sectors were not given stimulus packages like some other countries around the world did. The stronger rand is also not providing any relief when it comes to the export market," he added.
Huge government infrastructure projects and a construction boom tied to the 2010 Fifa World Cup have helped keep a floor under the economic fallout.
The construction industry is one of the few that has consistently seen positive growth despite the downturn.
Business Unity South Africa, which represents businesses, said despite signs of a global recovery, the turnaround remains tentative.
"The speed and extent of recovery are still subject to a high degree of uncertainty," the group said.
"The economy is lagging behind these international developments and hence the continued recession here."
- Sapa