Africa’s second largest economy, South Africa, though expected to grow at a moderate pace, is still performing below potential, Finance Minister Nhlanhla Nene said on Tuesday.
Also the country will probably miss this year’s economic growth target of 2.7 percent, with a five-month mining strike hurting everything from government revenue to exports, Finance Minister Nhlanhla Nene said.
“Attaining the desired levels of growth over the medium term is an important collective responsibility which calls for far greater synergy and cooperation than we experienced during the past two decades of our freedom,” Nene said at the launch of the new tax season.
The Treasury was still targeting revenue collection of nearly 1 trillion rand for the 2014/15 financial year, he added.
The economic outlook “has moderated,” Nene told reporters today in the capital, Pretoria. Recent forecasts by the International Monetary Fund and others show “the economy is not going to grow as fast as we had anticipated,” he said.
Gross domestic product contracted an annualized 0.6 percent in the first three months of the year as mining output dropped 25 percent, the most in almost half a century. The economy is at risk of shrinking again as about 220,000 metalworkers began an indefinite strike over pay today.
The mining strike that ended last week “had a significant impact on the economy,” Nene said. “It’s going to take a bit of time for the economy to return to its pre-strike performance.”
Standard & Poor’s cut South Africa’s credit rating to one level above junk on June 13, citing concerns that the government’s finances may be harmed as growth slows. Fitch Ratingsreduced its outlook on the nation’s creditworthiness to negative from stable on the same day.
The government has pledged to narrow the budget deficit to 2.8 percent of GDP in three years’ time from 4 percent in the fiscal year that ended in March. President Jacob Zuma pledged in his state-of-the-nation speech last month to grow the economy at 5 percent by 2019.
Current Account
In a separate speech, Nene said the current-account deficit has remained “stubbornly high” even as the rand weakened and the economy contracted. The gap on the current account, the broadest measure of trade in goods and services, narrowed to 4.5 percent of gross domestic product in the first quarter, the central bank said on June 18.
The rand fell 0.1 percent against the dollar to 10.6465 against the dollar today, taking its decline this year to 1.5 percent.
