Construction has helped South Africa avoid a technical recession

South Africa's economy has shrunk for the first time in 10 years, official figures have shown.

Gross domestic product (GDP) fell by 1.8% in the last three months of 2008 from the previous quarter.

It came as Lonmin, the world's third-biggest platinum producer, said it was cutting up to 5,500 jobs at two South African mines.

A worldwide commodities slump has seen dramatic falls in demand and prices of metals and other mined products.

UK-listed Lonmin said a deal to cut 4,000 jobs at the Marikana mine in North West province and 1,500 in Limpopo province had been agreed with unions.

It has been hit by tumbling demand from the car sector which uses platinum to manufacture catalytic converters.

"With the current backdrop of challenging economic conditions, these agreements are an important milestone in our objective of restructuring the company," said Lonmin chief executive Ian Farmer.

Diamond decline

Overall, South Africa's economy grew by 3.1% in 2008, official figures showed.

This was well below the government forecast of 3.7% and the previous year's 5.1%.

Construction ahead of the 2010 World Cup is expected to continue giving the country an economic boost.

However, Southern African economies which rely heavily on commodities such as diamonds, gold and industrial metals have been particularly badly affected.

Gold production dipped 13.6% to the lowest level since 1922, according to the Chamber of Mines - meaning it is now only the third largest gold-producing nation behind China and the US.

Last week, mining giant Anglo American said it would cut 19,000 jobs this year after a 29% fall in profits.

It blamed the fall in earnings on sliding demand for raw materials.

And earlier this week Debswana, a diamond producing firm jointly owned by Botswana's government and De Beers, said it would close two mines for the rest of the year because of falling demand.

Debswana's four diamond mines will close on 25 February, but two of them will resume work on 14 April.