SA economy showing signs of stability

South Africa’s economy is on a more sure footing but the target growth of 7% required to slash unemployment will not come without fixing infrastructure backlogs slowing expansion, treasury director general Lungisa Fuzile said on Friday.

Fuzile also said at the Reuters Economist of the Year Award that Africa’s largest economy was on a sustainable fiscal path and on track to attain a surplus by 2014/15.

The treasury has cut its growth forecast for 2012 to 2.7% from earlier forecasts of 3.4%, but sees a steady rise to 4.2% by 2014.

“This economy is really steaming ahead … economic data released since the budget [in February] have been positive, which supports our view that the economy is on a more sure footing,” Fuzile said.

But he warned of risks from a global slowdown including in power China, which imports resources from countries like South Africa to fuel its economic engine.

He also said structural constraints like an electricity grid having trouble powering the energy-intensive mining sector and coal transport bottlenecks would weigh on growth.

“Short of dealing with those structural constraints, that 7% growth target is not going to be achieved.”

He said South Africa was on a sustainable fiscal path, despite warnings from the three major ratings agencies, which downgraded their outlooks to negative from stable, saying long term risks were not being properly addressed by government.

The economy had been lifted by more buoyant revenue but the treasury would not adjust its borrowing plans for the 2012/13 financial year, despite a higher than expected revenue collection in the previous year, Fuzile added. — Reuters

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