South Africa’s economic growth in the first quarter will probably be slower than forecast after weak mining and manufacturing production, and retail sales data, Finance Minister Pravin Gordhan said.
“Output growth in the first quarter of this year was slower than we forecast at budget time,” Gordhan told lawmakers in Cape Town today. This was “mainly due to the impact of the Impala Platinum strike on mining production, retail sales have also slowed somewhat and manufacturing production was somewhat disappointing.”
Gordhan in February cut his growth forecast for this year to 2.7 percent because of the debt crisis and possible recession in Europe, South Africa’s largest trading partner, where Greece may default on its debts. Economic uncertainty in Europe, the U.S. and China made for an “increasingly dangerous global environment,” Gordhan said.
Lower growth may reduce the chances the central bank will raise its benchmark lending rate this year from 5.5 percent, the lowest level in more than three decades. The National Treasury hasn’t given an estimate for first-quarter expansion. Statistics South Africa is scheduled to released the data on May 31.
Mining production fell an average of 9.4 percent in the first three months of the year while manufacturing output declined for the first time in eight months in March, contracting an annual 2.7 percent, according to the statistics agency. Retail sales dropped 1.2 percent in the first quarter compared with the previous three months, it said on May 16.
A strike in January shut operations at Impala Platinum (IMP) Holdings Ltd.’s Rustenburg mine for two weeks. The company is the world’s second-biggest producer of the metal.
Despite high oil prices and a weak rand, “inflationary pressures have remained relatively subdued,” Gordhan said. South Africa’s consumer inflation rate was 6 percent in March, the top end of the central bank’s 3 percent to 6 percent target.
With parts of Europe “set to be trapped in economic recession for some time to come,” South Africa is seeking to boost trade with emerging markets, Trade and Industry Minister Rob Davies told lawmakers.
“South Africa’s trade and investment strategy will focus on the BRICS countries, high-growth markets in Africa, Middle East, Asia and other emerging economies such as Turkey, Indonesia, Chile, Vietnam and Thailand,” Davies said. South Africa is part of the BRICS grouping with Brazil, Russia, India and China.
Roads Agency Debt
The government won’t let the South African National Road Agency SOC Ltd. default on its debt, Gordhan said. The company’s plan to start electronic tolls to pay for upgrades of highways around Johannesburg was delayed, resulting in 200 million rand ($24 million) in monthly losses, Gordhan said.
Consumer and labor groups won a court interdict on April 28 to delay the tolls. They were due to help repay 37.9 billion rand of debt, according to the government.
This government will do “whatever it takes” to meet its debt commitments,’’ Gordhan said. “There is no danger to any state-owned entity. South Africa has a very, very proud history” in managing its debt sustainably, he said.
The rand strengthened 0.4 percent to 8.3037 against the dollar by 13:30 p.m. in Johannesburg. Forward-rate agreements starting in 12 months fell 12.5 basis points to 5.6350 percent as investors pared bets on an interest-rate increase in the next year.
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