SA economy will lag behind sub-Saharan Africa, says World Bank
The bank says growth has been hampered by low business confidence and the recent spate of power cuts
SA’s economy will struggle to grow in line with the rest of sub-Saharan Africa as business confidence remains in the doldrums, said the World Bank.
According to the Africa Pulse report produced by the Bank, the low business confidence holding back investment has largely been driven by the slow pace of structural reforms.
“SA came out of recession in the third quarter of 2018 but growth has been subdued and really disappointing as policy uncertainty continues to hold investment back,” World Bank chief economist for Africa Albert Zeufack said in a conference call on Monday.
The Bank left SA’s growth figures unchanged from its World Economic Outlook in October 2018 when it lowered forecasts from 1.8% to 1.3% in 2019 and from 1.9% to 1.7% in 2020. Growth for 2021 is estimated at 1.8%.
“This gradual pickup in growth reflects expectations that consumer spending will strengthen, spurred by low inflation, and long-delayed structural reforms will help revive investment, as business confidence rebounds,” said the report.
The downward revision reflects slower growth in Nigeria and Angola due to challenges in the oil sector and subdued growth in SA due to low business confidence
This is in line with the Reserve Bank’s growth forecast for 2019 which was revised down at the end of March from 1.7%. The Treasury remains slightly more optimistic with projected growth of 1.5%.
Lower-than-expected growth will come as a blow to President Cyril Ramaphosa as he comes under pressure to implement reforms to revitalise the economy in an election year. It’s a far cry from the 3% Ramaphosa targeted when he took office in February 2018. The economy faltered at the start of 2019 and persistent power supply cuts threaten to drag growth down further. SA has failed to breach the 2% mark in five years as unemployment nears the 30% mark.
“The impact of power cuts on growth, we have seen that already with the first quarter data,” World Bank senior economist Gerard Kambou said, citing the fall in manufacturing output and a lower purchasing managers index.
SA’s growth outlook is lower than projected growth in the region, which has been below population growth for four consecutive years. Growth in sub-Saharan African was 2.3% in 2018 and is expected to rebound slightly to 2.8% in 2019. In 2020, growth is projected at 3.3% — breaching the 3% mark for the first time since 2015. This, however, has been lowered from October by 0.3 and 0.5 percentage points, respectively.
“The downward revision reflects slower growth in Nigeria and Angola due to challenges in the oil sector and subdued growth in SA due to low business confidence,” according to the report.