South Africa’s economy ‘to grow 3.6%’

7 July 2011

South Africa’s economy is expected to grow at a rate of 3.6 percent this year and 4.3 percent in 2012, according to the African Economic Outlook 2011 report.

“South Africa’s real GDP has recovered from -1.7 percent in 2009 to 2.8 percent in 2010, driven primarily by a steady recovery in consumer spending, partially attributed to the Fifa World Cup,” the SA Institute of International Affairs (SAIIA) said when releasing the report on Tuesday.

“This rate of GDP growth remained clearly below trend, estimated around four percent per annum for South Africa.”

The report was co-authored by the African Development Bank, the OECD Development Centre, the United Nations Development Programme, and the United Nations Economic Commission for Africa.

It looks at economic, social and political development in 51 of Africa’s 53 countries.

The report found that Africa had weathered the global crisis relatively well, with growth of 4.9 percent in 2010.

However, political problems in North Africa and rising food and fuel prices could slow growth down to 3.7 percent in 2011.

Sub-Saharan Africa was expected to grow faster than North Africa, with a predicted growth rate of 5.8 percent in 2012.

China now Africa’s main trading partner

China overtook the United States in 2009 to become Africa’s main trading partner.

It has also became the main destination for South African exports since the middle of 2009 and is the leading source of imports.

South Africa became a member of the Brics – Brazil, Russia, India, China and South Africa – group in December.

“The challenge for the government is to show that it has a purposeful plan to engage with BRIC countries, to prioritise its productive capacity, and to maximise its contribution to the national economy,” the report found.

“Another challenge is to avoid neglecting traditional partners while nurturing its strategically important emerging partnerships.”

Global developments the biggest threat

The report said the major threat to South Africa’s economic outlook was global economic developments.

South Africa had achieved its first Millennium Development Goal by halving the proportion of the population living on less than US$1 a day.

However, the government still needed to tackle issues such as providing adequate public health services, improving the quality of education, and reducing unemployment, especially for the youth, the report found.

HIV/Aids remained a problem as South Africa had the world’s largest population of people living with HIV – 5.6-million.

The report found that structural problems like infrastructure bottlenecks hampered recovery in private investment in 2010.

Unemployment was still very high last year even though it declined marginally in the fourth quarter of 2010 to 24 percent from 25.3 percent in the previous quarter.

“Infrastructure bottlenecks and labour market constraints are likely to prevent a return to the pre-crisis growth rates in 2011 and 2012.

“However, growth in the medium term (post-2012) is expected to be stronger as the massive infrastructure development projects being undertaken by state-owned enterprises, such as Eskom and Transnet, start to bear fruit,” SAIIA said.

South Africa’s close economic ties to the global economy suggest growth could be affected by the evolution of the European Union, US and Chinese economies, and the trend of capital flows to emerging markets.

Sapa