Cape Town: Finance Minister Nhlanhla Nene has projected South Africa’s economy will grow by 1.4% this year, which is a 48% downward revision from 2.7%.
Briefing journalists prior to tabling his first ever Medium Term Budget Policy Statement (MTBPS) as Finance Minister, Nene said despite several constraints, important structural changes were occurring in major economic sectors, which are expected to boost economic growth.
He said while the economy will grow gradually by 3% in 2017, the downward revision comes at the back of a tough economic climate.
“The weak economic performance has put a great deal of pressure on the fiscus, with revenue insufficient to cover expenditure.
“The budget deficit is high, debt levels have approached the limits of sustainability and the economy is vulnerable to global vitality, especially in the face of monetary policy normalisation in advanced economies,” he said on Wednesday.
This as the Gross Domestic Product (GDP) recovered to 0.6% in the second quarter of 2014 after a turbulent first quarter.
The economy had taken a bruising in the first quarter and had slowed to an annualised rate of -0.6% due to a contraction in the mining and manufacturing sectors. The five month-long strike in the platinum sector was cited as one of the factors that led to the slowdown.
The Minister said achieving growth and job creation would require investments from the private sector, as well as structural reforms that will enhance the labour-intensity growth.
“Economic growth is expected to rise gradually over the medium term, reaching 3% by 2017.
“The improving outlook will be supported by moderate global growth, rising exports to the rest of the continent, the easing of transport and logistics constraints as infrastructure projects are completed, a stabilisation of electricity supply and a recovery in private investment,” said Minister Nene.
The Minister said South Africa’s longer term economic prospects are tied to a successful implementation of the reforms described in the National Development Plan and the Medium Term Strategic Framework (MTSF), which Minister in the Presidency for Performance, Planning, Monitoring and Evaluation, Jeff Radebe, unveiled not long after the opening of Parliament.
He said this would include large infrastructure investments in electricity and transport, expanded partnerships to encourage private sector investment; special economic zones to boost exports; programmes to encourage more dynamic, integrated cities and initiatives to improve the quality of education and skills development.
He said Critical MTSF interventions over the medium term include:
- Expanding energy supply through public and private investment, including procuring 2.5GW of privately supplied baseload electricity and signing cogeneration agreements for over 800MW to be added to the national grid;
- Expanding rail capacity for coal exports between Mpumalanga and the Richards Bay Coal Terminal, building a new heavy-haul rail line from the Waterberg region, and increasing port capacity for iron exports via Saldanha and the Northern Cape corridor;
- Enhancing the performance of sea ports and inland terminals, revising and consolidating port charges, establishing a single transport regulator and reducing cross-subsidisation in transport pricing;
- Preparing to exploit on- and offshore oil and gas by developing an exploratory drilling plan and legislation;
- Improving dispute-settlement mechanisms in labour relations; and
- Enabling immigration reform to encourage people with skills to work in South Africa.