South African economy grows 3.1% in 2011

South Africa’s economy grew 3.1 percent in 2011, up from 2.9 percent the year before, officials said Tuesday — welcome news for President Jacob Zuma but well short of the seven percent he is chasing.

The continent’s largest economy expanded 3.2 percent in the last quarter of the year, up from a revised 1.7 percent in the third quarter, Statistics South Africa said in a statement.

The figures come on the heels of Zuma’s announcement earlier this month of a seven-year, 300-billion-rand ($39.8-billion, 29.6-billion-euro) infrastructure investment drive aimed at creating new jobs.

South Africa’s 23.9-percent unemployment rate is one of Zuma’s biggest challenges.

The government says economic growth needs to hit seven percent to reach the president’s goal of creating five million jobs by 2020.

But Finance Minister Pravin Gordhan warned last week that the wobbly global economy would likely slow growth to 2.7 percent in 2012 before a rebound to 3.6 percent next year and 4.2 percent in 2014.

“These are modest rates of expansion relative to the social and developmental challenges we face and the opportunities that our mineral wealth and human capabilities offer,” he told parliament.

That poses a headache for Reserve Bank Governor Gill Marcus.

The bank has held the key interest rate at a 30-year low of 5.5 percent since November 2010, but is walking a tightrope between inflationary pressure and the need to boost growth with further rate cuts.

Inflation rose to 6.3 percent in January, the third straight month the figure came in above the Reserve Bank’s target ceiling of six percent.

Statistics South Africa predicts inflation will dip back down in the first quarter of 2012.

The statistics agency said the main drivers of growth in 2011 were finance, real estate and business services, followed by government services and the hospitality and motor industries.

The annual growth rate was in line with government projections from October.