South Africa’s weaker-than-expected economic growth suggested that the 3,3% forecast for 2003 was out of reach, Razia Khan, chief economist for Africa at the Standard Chartered Bank in London, said on Tuesday.
The market expected a 1,6% rate for the second quarter of the year, compared to the 1,1% announced by Statistics SA, she said in a statement.
The 1,1% is the lowest growth figure since the beginning of 1999.
Investec Asset Management’s Andre Roux said: ”It is now fairly certain that for the year as a whole, the growth rate will be under 2%.”
He pointed out that agriculture, with an exceptionally weak contribution, was largely to blame. Manufacturing also contracted.
A marginally slower growth rate in the tertiary sectors was noted.
This was the most resilient aspect of the economy and the main reason why the country should continue to experience positive economic growth, Roux said in a statement.
He expected agriculture to continue to slow growth down for the current, and the next two, quarters. The statistical impact of the projected poor wheat harvests would only register in the last quarter of this year and the first of 2004.
Roux believed the other sectors would recover gradually.
”However, it is doubtful that the economy will reach quarterly rates above 2,5% at any stage in 2003,” he said.
Mark Lowe, Democratic Alliance spokesperson on jobs and job creation, described the latest growth rate as a blow to South Africa’s jobless millions.
”At least 6% is required if we are to reduce the unemployment queues significantly.”
More than a third of South Africans of working age were unemployed, Lowe said.
The gap between jobs and jobseekers was growing every year with five times more new people looking for jobs than jobs available, he said.
”The lowest growth rate in nearly five years cannot be blamed entirely on international factors. It is easy to blame these factors for the latest disastrous figures, but the government needs to focus on the domestic issues that can be addressed to improve growth prospects.”
To reach a 6% growth rate, South Africa’s economy needed to inspire confidence and attract investment, according to Lowe. Macro-economic fundamentals were not enough, he said.
Aspects that Lowe said needed attention included an equitable, transparent and measurable black economic empowerment strategy; flexible labour legislation that encouraged job creation; and widespread skills training and entrepreneurial development.
Also on Tuesday, Statistics South Africa announced that the year-on-year consumer price index excluding mortgage costs (CPIX) stood at 6,6% in July, compared to June’s 6,4%.
The increase was higher than the market expected, said Khan.
”The 1,1% month-on-month rise was sufficient to reverse, at least temporarily, the favourable downtrend in annual inflation that has allowed the South African Reserve Bank to cut interest rates by 250 basis points so far this year.”
The housing component, and to a lesser extent the petrol price increase of 20% a litre over the survey period, pushed the CPIX higher, Khan said.
The petrol price rose by a further 18 cents a litre in August, with a more moderate hike expected in September, according to Khan.
”Nonetheless, the favourable base effect should still allow the CPIX data to resume its year-on-year downtrend.
”An interest rate cut in October is still very much on the cards, although — if the trend of high monthly inflation observed in July should persist — the willingness of the Reserve Bank to keep cutting interest rates by 100 basis points at a time may be in doubt.” — Sapa