Economy is ‘flat on its back’ and growth is below what is needed to create jobs


Economy is ‘flat on its back’ and growth is below what is needed to create jobs
Photo. REUTERS/Siphiwe Sibeko

South Africa’s economy is flat on its back and growth is below what is needed to create jobs in Africa’s most industrialised country, South African Reserve Bank’s Deputy Governor Daniel Mminele said on Friday.

South Africa’s economy is seen growing less than 1 percent this year after expanding 1.3 percent in 2015, hobbled by power cuts last year, low commodity prices, drought and political ructions that have unnerved investors.

“It is flat on its back,” Mminele told Reuters in an interview on the sidelines of the World Economic Forum on Africa in the Rwandan capital Kigali, referring to the economy.

“That is dismal growth for an emerging market and certainly way below what we require to sort of put a dent in unemployment in a substantial and sustainable way.”

Data released on Monday showed unemployment at its highest level on record in the first quarter, denting the government’s efforts to convince ratings agencies not to downgrade South Africa’s credit status.

The central bank expects the economy to grow by 0.8 percent this year while the National Treasury sees growth of 0.9 percent. The International Monetary Fund has cut its growth outlook for South Africa to 0.6 percent in 2016.

Looking forward, Mminele said improved power supply in South Africa should spur economic growth, after electricity blackouts in the first half of last year hit economic activity.

“We expect that more capacity will come on and that that has been a big drag,” he said.

“It is going to be a rough time for a while but in the medium term we should see improvements (in the economy).”

State-owned utility Eskom said on Thursday it does not expect to implement electricity cuts this year as new plants have beefed up power supply.

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