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South African Growth Slows to 1.3% as Unemployment Rises

May 26, 2015
'Unemployment remains the biggest problem in South Africa, but we see some progression. There is an upward trend, albeit subdued, that shows the labor absorption rate is increasing.'

PRETORIA, South Africa — South Africa’s gross domestic product slowed to a disappointing 1.3% in the first months of 2015, official data showed Tuesday, as rolling power cuts dampened manufacturing output.

The figure announced by Statistics South Africa was sharply below growth of 4.1% in the last quarter of 2014 as the country struggles with an electricity crisis and high unemployment.

New unemployment figures released Tuesday were the highest since 2003, underlining the weak economy two decades after the end of the apartheid regime. The unemployment rate was 26.4% in the first quarter of 2015, rising to 50.3% among 15- to 24-year-olds and 31.4% among 25- to 34-year-olds.

“Unemployment remains the biggest problem in South Africa,” said statistician-general Pali Lehohla. “But we also see some progression. ... There is an upward trend, albeit subdued, that shows that (the) labor absorption rate is increasing.”

South Africa’s manufacturing industry fell 2.4% last quarter, while agriculture has been badly hit by the effects of a severe drought, according the latest figures.

“Manufacturing has yielded results that are negative,” said Lehohla speaking over a video link from Cape Town to reporters in Pretoria, the country’s administrative capital. “Of course, electricity as a major driver of production – its absence dampens the production.”

Power cuts now common

Load-shedding — regularly-scheduled power cuts to reduce energy usage — has become part of everyday life for many people and companies in South Africa.

State-owned power company Eskom, which generates more than 95% of the country’s electricity, has been weakened by years of underinvestment and aging infrastructure, as well as governance problems.

The South African economy is due to grow at about 2.2% this year.

“The upside will be contained by load shedding, lower international commodity prices and subdued global demand,” Nedbank said in a statement. “Today’s GDP figures are consistent with the Reserve Bank’s general assessment of the economy, reflecting little underlying momentum.”

South Africa’s poor performance comes at a time when other countries in the sub-Saharan region are on track to record growth of 3.5% this year, according to a report released on Monday by the African Development Bank.

“Nobody should be that surprised,” said Ryan Wibberley, head of equity dealing for emerging markets at Investec. “I think the risks to growth must stand to the downside based on the plight that Eskom is in.

“The picture is — I don’t want to say bleak — the picture is concerning. There needs to be a resolution of the power situation, a resolution of wage negotiations and a turnaround in the monetary cycle.”

The ruling African National Congress party has failed to create jobs in South Africa, where whites still earn considerably more on average than blacks, who are also more likely to be unemployed.

Frustration over that resulted in xenophobic riots earlier this year, with marauding mobs of South Africans targeting foreigners and looting their shops, claiming that they were stealing jobs.

By Stephanie Findlay

Copyright Agence France-Presse, 2015

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