By Stella Mapenzauswa
Cape Town - South Africa has cut its 2012 growth forecast to 2.5 percent from the 2.7 percent seen earlier in the year, the National Treasury said on Thursday, citing structural constraints and the impact of strikes that have hit the mining industry hard.
In a policy document outlining the budget for the next three fiscal years, the Treasury noted the impact of a global slowdown on local growth, but conceded the main obstacles were domestic.
“Widespread strikes in the mining sector have had a significant effect on the economy in 2012. 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,” it said.
About 100,000 workers, mainly in the key mining sector, have downed tools for better pay since August in a wave of strikes that has sparked credit downgrades by ratings agencies Moody's and Standard and Poor's.
Finance Minister Pravin Gordhan sought to allay fears over the outlook for Africa's biggest economy and said the recent credit downgrades were inappropriate.
“We have an extremely sound and sustainable fiscal framework,” he told a news conference.
“We are not about to fall over any cliff.”
But despite Gordhan's brave face, the Treasury scaled back its growth forecast for 2013 to 3.0 percent, from the 3.6 percent seen in February.
It expects growth to rise gradually to 4.1 percent by 2015.
The government has said growth needs to average about 7 percent to make a significant dent on the 25 percent unemployment rate.
Household consumption, a key driver of growth in previous years, was seen slowing to 3.4 percent in 2012 and 3.5 percent in 2013 from 5.0 percent in 2011.
Inflation would stay within the Reserve Bank's 3 to 6 percent target band although rising international food prices, higher petrol costs and a weaker exchange rate would cause upward pressure during the second half of 2012.
A wage agreement reached this year between government and public sector unions was higher than projected in the February budget and would cost 37.5 billion rand ($4.3 billion) over the medium term, the Treasury said.
The South African Reserve Bank has already warned wage growth could pose a risk to the inflation outlook. - Reuters