File image: IOL.

JOHANNESBURG - The world Bank on Tuesday slashed the country’s economic growth outlook for this year to 0.6%, from 1.1% it forecast earlier in the year, and said that South Africa’s second quarter growth of 2.5 percent would be insufficient to restore positive per capita gross domestic product (GDP) growth for the year.

However, the bank said it expected South Africa’s economic growth for next year to be 1.1 percent, with a growth of 1.7 percent expected in 2019 supported by an improvement in commodity prices and strengthening balance sheets of households.

Paul Noumba Um, World Bank country director, said in an environment, where the national budget was constricted, South Africa could turn to encouraging private innovation as one of the several ways in which to improve the lives of the poor. 

“South Africa’s productivity growth is diverging from global growth and the country risks falling further behind its peers. This would be to the detriment of the poor, for whom a growing economy is necessary for jobs, and a sustainable system of social grants,” Noumba Um said.

Last month Statistics South Africa (StatsSA) said South Africa’s weak economic growth, high unemployment, and greater household dependency on credit and policy uncertainty condemned 30.4 million into poverty between 2011 and 2015. 

The World Bank report also found that productivity in South Africa fell by 6 percent between 2007 to 2016 and attributed this to insufficient private sector investment in innovation. The report further revealed that the country’s private research and development (R&D) expenditures decreased by about 40 percent since 2009 with lower productivity growth having cost the country 0.7 percent of foregone annual GDP growth since 2008.

Sebastien Dessus, the World Bank program leader, on Tuesday said that South Africa had produced less overtime with the same amount of labour and capital since the global financial crisis.

“Given South Africa’s untapped potential for absorbing and adapting foreign technologies, private R&D can be turned into a more powerful driver of corporate profitability and economic growth.” 

“Innovation can help improve the lives of the poor through the provision of better and cheaper goods and services, and expand economic opportunities through the introduction of disruptive technologies that can lower barriers to competition,” Dessus said. In July, the SA  Reserve Bank halved its forecast for 2017 growth to 0.5 percent from a previous forecast of 1.0 percent and the 2018 forecast to 1.2 percent from 1.5 percent. In 2019 the reserve bank said it saw growth of 1.5 percent, down from 1.7 percent it had initially pencilled in.

- BUSINESS REPORT