Strikes dent SA growth, slows to 1.2%

2012-11-27 12:21

Johannesburg - South Africa's economic growth slowed to 1.2% in the third quarter of 2012 on a seasonally adjusted and annualised basis, compared with a revised 3.4% rise in the second quarter, data showed on Tuesday.

On an unadjusted year-on-year basis, economic growth was at 2.3% in the third quarter from a revised 3.1% in the second quarter.

A Reuters poll of 15 economists expected growth to have slowed to 1.5% in the third quarter because of strikes in the mining sector.

Investec Group economist Annabel Bishop said the third quarter GDP data clearly has captured the impact of South Africa's work stoppages stemming from recent illegal strike action on economic activity until the end of September.

"Growth for the full year of 2012 is likely to be lower than the 2.5% previously expected, but still above 2.0%, compared to the average of 3.3% since 1994.

"The growth potential of the South African economy is estimated at 3.5% - 4.0% - above this could be deemed inflationary as demand led inflation rises.

"Clearly there is little evidence of demand led inflation pressures currently, with price pressure stemming instead from exogenous factors such as rand weakness and high food prices, and the supply side concern of real wage increases.

"Given the upward price pressures the South African Reserve Bank is unlikely to alter interest rates on the basis of the third quarter's poor outcome, indeed it already acknowledged the likely slowing in growth in the November MPC (monetary policy committee) statement.

"In the absence of further marked strike action the economy should see economic growth pick-up to 3.0% in 2013, and lift to 5.0% by 2016, driven additionally by greater consumption expenditure (both government and the private sector) and fixed investment.

Christie Viljoen, economist at NKC Independent Economists, said the weak growth number is mostly attributed to the contraction in mining as all the other sectors recorded growth.

"Obviously this was expected given the strikes we had in the mining sector, so it looks like it was worse than anticipated.

"The agriculture sector continued to grow strongly, so we'll have to see what happens there in the fourth quarter with the strikes that we've got there at the moment as well."

Nomura's Peter Attard Montalto said it would appear mining was roughly on forecast so the surprise came from other segments most likely effected by the transport workers strike and petrol shortages more than we had expected.

"Overall, today's number probably won't meaningfully surprise the MPC enough yet to get a cut in January without more international growth shock evidence.

"Given the revision up to the previous quarter on quarter number the amount of surprise here is limited really and shows the economy slowing but with mining a small part of the economy in volume terms the impact of the strike in first round effects remains limited.

"It is the wider second round effects on sentiment and FDI (foreign direct investment) that we have to wait for into next year that can ultimately prompt the MPC into a cut."

The rand was firmer at R8.8370/$ at 11:53 from R8.847 before the data was released at 11:30.

The yield on the benchmark 2026 government bond dipped to 7.59% from 7.6% beforehand.

South Africa's economy has been hesitant to recover since a 2009 recession, despite the SA Reserve Bank cutting interest rates by 50 basis points in July to help support economic growth.

A festering debt crisis in Europe, which takes in a quarter of South Africa's exports, is weighing on domestic growth prospects, while three months of violent strikes in the mining sector have also put an added drag on prospects for growth.

The Finance Ministry and the Sard had already cut growth projections to 2.6% this year, in line with the IMF.

The ministry has said the economy needs to grow by 7% on a sustained basis to make a dent on a 25% unemployment rate.

  • ianon.ym - 2012-11-27 12:42

    1,2% thats free-fall ...

      loki.scribus - 2012-11-27 13:09

      And with more strikes planned next year (if reports are correct), we might just be in for a recession. Watch retailers push their prices up just before that happens.

      wwrer.ww - 2012-11-27 14:49

      We are now sliding down the 3rd world ranks. Africa is growing at 5%. SA is sliding and sliding, falling further and further behind, but the worst is yet to come: electricity costs will skyrocket as Eskom needs 14% increases each year, transport costs will skyrocket with new taxes, municipal rates will skyrocket as more and more municipalities run out of money. Everywhere prices of goods and services will increase because we are building an expensive, unproductive, unhealthy country. A lot of the welfare is wasted on cigarettes and alcohol, the only luxuries the poor can afford - further lowering the health care of South Africans who are stressed out over crime, unemployment and the poor economy. The ANC is so far from its goals, it's never been further from them, than today.

      philip.harris.967 - 2012-11-27 15:08

      Of course there will be more srrikes ..the masses will keep striking until they are paid a living wage for a hard days work. SA is officially the most inequal country on this Planet. If this doesn't change we are dead in the water.

      wwrer.ww - 2012-11-27 16:16

      philip.harris no matter what you pay them, they will strike. The strikers are often obese, South Africa is the world's 2nd / 3rd most obese nation. Google South Africa 3rd Most Obese Country The women that take part in these strikes are often obese. A living wage, is therefore to these people, one where the world's 2nd, 3rd most obese nation, becomes the #1 in terms of obesity, to overtake the US.

  • jaco.bruwer.73 - 2012-11-27 12:46

    We don't have a 25% unemployment rate. it is 29-30% and rising.

      jaco.skalkwyk.73 - 2012-11-27 12:51

      Its actually 40%, according to census...

      ryan.a.smith.3958 - 2012-11-27 13:09

      its actually 40% ... the numbers you refer to do not take into account people that have given up looking for work

  • john.loveland.9 - 2012-11-27 12:51

    COSATU. Please stand up and let your voice be heard. Explain to those who support and pay your salaries the consequences of this slow-down

      philip.harris.967 - 2012-11-27 15:10

      John , why dont YOU try explaining to Miners and others why they should be doing a hard days labour for peanuts. Explain why a country as rich in potential as SA is the most inequal on this Planet.

      wwrer.ww - 2012-11-27 16:34

      philip.harris.967 it is unequal, because the ANC is too pathetic to create jobs. No job means no income. No income means rising inequality between those that do have jobs and those that don't. So COSATU and all the unions and the ANC's pathetic socialist policies are to blame for the rising unemployment and rising inequality between those that do have a job and those that don't. And half of the youth are out of work. So when everyone gets their yearly salary increases, these youths do not even get a salary. The ANC and COSATU is to blame for most of our current unemployment and inequality.

  • gary.desousa.5 - 2012-11-27 12:55

    And so the free fall will continue,strikes and layoffs follow like night and day. The tax base shrinks with emigration of our youth and skills flee until zim 2 is on the doorstep with nationalized industries and socialist tendancies

  • jaco.bruwer.73 - 2012-11-27 12:55

    Economy growth will only in crease if people have faith in the rand. Stop rap, crime, corruption, people in high positions that don't do there job, spending tax payers money on huge houses and nonsense. Focus on the pore and to help the country and not self gain. Then U will see a 7% growth and higher in no time.

      J.Stephen.Whiteley - 2012-11-27 18:26

      Yes. Also: revive NEDLAC; declare Parliamentarians' interests; scrap Labour Laws and BBEEE; remove the privileged position of COSATU; reduce taxation; allocate 25% of taxes to Social Welfare (presently 15%); scrap Municipal Grants (they are embezzled); reform the electoral system. Dreams? Practical politics.

  • bbooyse - 2012-11-27 12:56

    Strikes damages economies?!? Who knew?!?

  • braamc - 2012-11-27 12:57

    The growth prospects for this country is zero with these thieving corrupt fools in government

  • johan.jacobs.5680 - 2012-11-27 13:07

    Not unexpected.

  • zimzon.zimzon - 2012-11-27 13:13

    ANC morons do not understand economy. They have not built a single new university in the 18 years that they are in power. They are not interested in education. The apartheid government did much more for black education than the ANC morons...

  • mac.lesibana - 2012-11-27 13:15

    Strikes does not only affect growth on economy alone but deteriorate chances of job opportunities nd this halt economy ernomously.

  • rian.dejager.3 - 2012-11-27 13:16

    And who should we thank??? The very "clever" people from COSATU. Don't turn around now and say NOBODY warned you...

  • Rob Allen - 2012-11-27 13:21

    the cANCer and it's sheeple are too dumb to understand how economies work. Time for their suffering is nigh and don't expect help and sympathy from anyone you did this to yourselves

  • Montagnes.Bleues - 2012-11-27 14:44

    Never mind, in the #Nkandlagate bunker there is no crisis and to top it all the tip of Absolutely No Consequences as well. The zuma indian & far east mafia will have to bring back quite a bit of the ill begotten gains they have syphoned offshore to keep SA going from here on.

  • siphoza.zandela - 2012-11-27 16:56

    Thanks to the bloody trade unions, they will sink our country in the the pits of hell, They must make strikes illegal in South Africa, thats the only way to get our economy right. Look at China, strikes are illegal as they know it will destroy the economy and when the ecomony is f......ed, then millions well loose their jobs..So talk about job creation se gat and JZ dumb goverment. Zuma wants to create 5 millions job, he, he, he what I laugh. He can hire them to weed is kraal at Nkandla and do his wives laundry and clean his wives homes, Thats how he can employ the millions that will be jobless

  • tobie.schalkwyk.7 - 2012-11-27 17:29

    That's how it goes when unions govern the country. Margaret Thatcher saved the UK from the same fate yonks ago. If nothing is done about this, prepare for 0% growth - whilst the rest of Africa's growth spirals upwards.

  • Brad - 2012-11-27 19:05

    "Clever blacks" from COSATU caused this.

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