Uncertainty in the South African economy grows larger as Finance Minister, Pravin Gordhan, announces a revised growth estimate for 2016, down to 0.5 per cent, in his mid-term budget policy statement.
The halving of South Africa’s already ailing economic growth, from 0.9 per cent in February’s budget speech, was made in the national assembly where Gordhan added that the country’s economic performance continues to reflect low levels of business and consumer confidence.
The Finacne Minister is however positive about South Africa’s economic growth in future, stating that growth is expected to increase to 2.2 per cent by 2019. This will be achieved by having more reliable electricity supply, improved labour relations, low inflation, a recovery in business and consumer confidence, stabilising commodity prices and stronger global growth.
The agriculture, forestry and fishing sector has contracted by 8.3 per cent in the first half of 2016 compared with the same period in 2015. The drought, which has been constant for two consecutive seasons, has contributed to the contraction, which sees South Africa becoming a net importer of maize in 2016/17. Imports are expected to exceed 2 million tons.
The mid-term policy budget statement also noted the resilience in exports of certain fruits, nuts and beef, which is supported by the weaker rand and global demand. The statement eluded to the output recovering as weather conditions improve.
Low commodity prices and weak global demand saw mining production down by 8.3 per cent in the first half of 2016 compared with the same period in 2015, while manufacturing has contributed 0.2 per cent to gross value added in the first half of 2016.
Capital investment has seen a decline of 2.6 per cent in the first half of 2016, compared with a 3.6 per cent increase in the corresponding period of 2015. The mid-term budget policy statement says the contraction is a result of reduced private investment in a climate of weak business confidence.
Investment by public corporations also fell by 2.6 per cent in the first half of 2016, from an average growth rate of 3.7 per cent between 2012 and 2015. While government investment growth averaged 8.6 per cent during the same period, it has slowed to 5.8 per cent in the first half of 2016.
The silver lining to South Africa’s gloomy economic outlook is the Global Competitiveness Index which has improved by six spots to 47 out of 138 in the past three years.