Business Unity South Africa has revised its 2012 growth forecast for the local economy from 2.7% to 2.5% adding to a growing number of stakeholders who expect the economy to slowdown significantly this year.
South Africa’s economic growth seemed to be bouncing back last yeear by registering 3.5% but the global economic crisis has caught up with local economic activity. Key sectors of the economy manufacturing and mining are struggling partly as a result of their exposure to the haemorrhaging Euro Zone.
BUSA said weaker growth performance has been the outcome of both deteriorating global economic conditions as well as domestic constraints on growth. “Growth in SA has lost momentum. BUSA therefore notes the view expressed earlier this week by Finance Minister Pravin Gordan that the government would also lower their growth forecast for 2012. On present evidence BUSA sees economic growth rising to about 3.5% in 2013”.
BUSA shares the concerns expressed by the World Bank and others about the risks to social and political stability in South Africa posed by high unemployment, huge income discrepancies and widespread poverty.
BUSA said it broadly supports both the New Growth Path (NGP) and the National Development Plan (NDP) as essential mechanisms for addressing these challenges over time. “Under the auspices of the NGP in particular, business and other social partners have committed themselves to accords in the fields of education, skills development, local procurement and the green economy to improve economic performance and access to opportunity”.
BUSA said it has for some time recognised that employment is particularly challenging for young workers and residents of townships, rural areas and informal settlements. “While high youth unemployment is not unique to South Africa, it is clear again from the World Bank report that it is an especially acute problem in this country. It therefore remains urgent for all possible steps – including a youth wage subsidy – to be taken to alleviate the phenomena of youth unemployment”.
BUSA said the key to higher growth and more jobs in South Africa ultimately lies in raising total fixed investment in both the private and public sectors. If SA wants to eventually reach a 6% growth rate, with all its benefits, then such a growth rate will need to be supported by total fixed investment of about 25% of GDP in the years ahead. Both the NGP and the NDP base SA’s future economic performance on rising levels of total fixed investment and focus on measures which encourage such an outcome..
Against a background of increasing global economic setbacks and the less-than-optimal growth rate of 2.5% now forecast by BUSA and others for the SA economy in 2012, infrastructural investment therefore assumes particular importance at this stage. It is now essential that the existing infrastructural programme be implemented as soon as possible ‘to crowd private sector investment in.’ Implementing the right infrastructural investment projects successfully is now a missing link to a better economic performance for SA.