South Africa's economic growth will slow to 2.5 percent this year after wildcat mining strikes cost $1.2 billion and dimmed the outlook for Africa's powerhouse, Finance Minister Pravin Gordhan said Thursday. "Economic growth in South Africa has slowed to just 2.5 percent this year, held back by both global uncertainty and disruptions to domestic production," Gordhan said presenting a budget that cut the country's growth forecast from 2.7 percent.
The forecast is half of that expected for sub-Saharan Africa as a whole. Gordhan also revealed that the country's public deficit rose 0.6 percentage points to 4.8 percent of output this year owing to lower revenues, while public debt rose almost three points to 35.7 percent of gross domestic product (GDP). South Africa ramped up spending after falling into its first post-apartheid recession in 2009, leading to a dramatic widening of the deficit after posting a surplus five years ago.
"We have added more than one trillion rand to government's debt, because of the recession," said Gordhan. "Despite the fiscal stimulus, reinforced by accommodative monetary policy, South Africa's economic recovery has been tepid. Investment, trade and employment growth have remained hesitant."
Forced stoppages at several global mining giants since August has battered exports, curbed revenues and hit the nation's current account, with that deficit set to surge to 5.9 percent of GDP from 3.3 percent last year. "We say very clearly that the problems in the mining area do reflect upon our growth prospects and it's going to still take us some time to understand what the full impact on the growth is, depending how and when these strikes actually end," Gordhan said before addressing lawmakers. The widespread mining strikes which flared out of a deadly six week stand-off at platinum miner Lonmin had a significant effect on the economy, according to the Treasury's medium term budget policy statement which Gordhan presented. "The events at Lonmin's Marikana mine and the spread of industrial action since August have dented confidence and lowered growth prospects for the remainder of the year."