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Economic outlook subdued by mining unrest

Sep 07 2012 08:57 Reuters

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Johannesburg - South Africa’s economic growth will remain subdued in the medium term due to unrest in the platinum sector and a weak global economic environment, a Reuters poll showed on Thursday.

Economists kept their median forecast for growth of 2.5% this year, after trimming it in last month’s poll, but some in the poll of 17 analysts were more bearish, projecting only a 2.2% expansion.

South Africa is the world’s top platinum producer and its mining sector is being hit by labour unrest, most recently fuelled by outrage over the police killing of 34 striking miners last month at Lonmin’s Marikana mine.

The Reserve Bank has reduced its 2012 growth forecast to 2.7% from 2.9%.

"The strike in the mining industry seems to be spreading. I think Q3 is going to be a little a bit worse, so maybe expect a contraction there," said Collen Garrow, an independent economist at Meganomics.

Africa’s biggest economy accelerated in the second quarter, growing 3.2% on a quarter-on-quarter basis, boosted by a surprise jump in mining as miners returned to work after strikes and stoppages at the start of the year. Gross domestic product rose 3% from a year earlier.

However, more strife at Lonmin’s Marikana mine, and the fatal shootings on August 16 present a big setback.

On Wednesday, more than 3 000 striking platinum miners marched through streets near Marikana, the largest protest at the hot spot since the killings.

The mining sector, which accounts for 6% of gross domestic product, has been repeatedly hit by disputes over low wages that reflect widespread anger over enduring inequalities in the economy.

The poll expects interest rates to remain unchanged for this year and next year at a 40-year low of 5.0%. It then sees them rising by 100 basis points by the end of 2014.

Seven of the 17 economists polled saw a chance that the Reserve Bank will cut interest rates again by another 50 basis points before the end of the year to offset the effects of sluggish growth in Europe.

Inflation forecasts were nudged slightly lower to 5.54% this year from 5.58% in the previous poll. They were also lowered for the next two years.

The main Econometer confidence index fell to 256.52 in August from 261.78 the previous month.


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lonmin  |  sa economy  |  lonmin unrest
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