SAfrica GDP growth slows to 1.3% in first quarter

26th May 2015, Comments 0 comments

South Africa's gross domestic product slowed to a disappointing 1.3 percent in the first months of 2015, official data showed Tuesday, as rolling power cuts dampened manufacturing output.

The figure announced by Statistics South Africa was sharply below growth of 4.1 percent in the last quarter of 2014 as the country struggles with an electricity crisis and high unemployment.

The manufacturing industry fell 2.4 percent, while agriculture has been badly hit by the effects of a severe drought.

"Manufacturing has yielded results that are negative," said statistician-general Pali Lehohla speaking over a video link from Cape Town to reporters in Pretoria, the country's administrative capital.

"It's a little tricky whether it is because of electricity or because there is subdued demand from manufacturers," said Lehohla.

"Of course electricity as a major driver of production -- its absence dampens the production."

Load-shedding -- regularly scheduled power cuts to reduce energy usage -- has become part of everyday life for many people and companies in South Africa.

State-owned power company Eskom, which generates more than 95 percent of the country's electricity, has been weakened by years of underinvestment and ageing infrastructure, as well as governance problems.

The South African economy is due to grow at about 2.2 percent this year.

"The upside will be contained by load shedding, lower international commodity prices and subdued global demand," Nedbank said in a statement after the figures were released.

"Today's GDP figures are consistent with the Reserve Bank's general assessment of the economy, reflecting little underlying momentum."

"Nobody should be that surprised," said Ryan Wibberley, head of equity dealing for emerging markets at Investec.

"I think the risks to growth must stand to the downside based on the plight that Eskom is in.

"The picture is -- I don't want to say bleak -- the picture is concerning," he said.

"There needs to be a resolution of the power situation, a resolution of wage negotiations and a turnaround in the monetary cycle."

South Africa's poor performance comes at a time when other countries in the sub-Saharan region are on track to record growth of 3.5 percent this year, according to a report released on Monday by the African Development Bank.

The ruling African National Congress party has failed to create jobs in South Africa, where over two decades after apartheid rule ended whites still earn considerably more on average than blacks, who are also more likely to be unemployed.

Frustration over that resulted in xenophobic riots earlier this year, with marauding mobs of South Africans targeting foreigners and looting their shops, claiming that they are stealing jobs.

© 2015 AFP

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