News / Africa

    South Africa Economy Sapped by Lower Exports to Europe

    South African Finance Minister Pravin Gordhan delivers his 2013 budget speech at Parliament in Cape Town, Feb. 27, 2013.South African Finance Minister Pravin Gordhan delivers his 2013 budget speech at Parliament in Cape Town, Feb. 27, 2013.
    x
    South African Finance Minister Pravin Gordhan delivers his 2013 budget speech at Parliament in Cape Town, Feb. 27, 2013.
    South African Finance Minister Pravin Gordhan delivers his 2013 budget speech at Parliament in Cape Town, Feb. 27, 2013.
    Reuters
    Subdued European demand for its exports forced South Africa to cut its 2013 economic growth forecast on Wednesday, while missed revenue targets looked to be creating a wider budget deficit than first thought.

    While vowing to keep a lid on overall spending, Finance Minister Pravin Gordhan committed to more social spending for South Africa's poorest, many who live in shanty townships and a are key support base for President Jacob Zuma as he gears up for general elections early next year.

    "This government will not get to the point where we impose austerity on our people,'' Gordhan said, alluding to fiscal tightening measures that have triggered violent protests in European countries such as Greece.

    In his three-year budget tabled to parliament, Gordhan said the 2013 budget deficit would be 4.6 percent of GDP, a bit larger than his last forecast in October. The deficit is slightly narrower than economists' forecasts, however, and a big decline from the 5.2 percent gap projected for 2012/13.

    Mining sector

    This year's shortfall was partly due to reduced tax and mineral rights revenue from the mining sector, hit by strikes last year that left more than 50 people dead and shaved 15 billion rand [$1.7 billion] of output from Africa's biggest economy.

    South Africa remains the laggard among its peers in the BRICS group of leading emerging market economies, with China expecting growth of 8.2 percent this year, followed by 5.9 percent for India and 3.5 percent in Brazil.

    With growth flatlining in Europe, South Africa's main export market, Gordhan was forced to cut this year's growth forecast once again to 2.7 percent - half South Africa's pre-2008 financial crisis average.

    The relatively subdued longer-term outlook also means the economy has little chance of making any in-roads into the persistent 25 percent unemployment regarded as the main threat to social stability two decades after the end of apartheid.

    "If growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending,'' said Gordhan.

    Consumption muted

    Domestic consumer demand, which accounts for about 60 percent of GDP, is likely to remain modest as households struggle to find jobs while existing debt levels remain high.

    Gordhan said the government, still smarting from credit downgrades from Moody's, Standard & Poor's and Fitch, would keep a tight grip on its purse strings, with plans to reduce spending by 10.4 billion rand [$1.2 billion].

    "The deficit is there because of the revenue loss that we have experienced, not because of expenditure," said Gordhan in a news conference before his speech to parliament.

    The projected deficits are unlikely to improve South Africa's credit ratings, which now stand slightly above the investment grade cut-off, according to analysts.

    "Under the circumstances, [the government] probably struck a reasonable balance given the fiscal constraints and difficult economic circumstances,'' said Renaissance Capital economist Elna Moolman.

    "Today's budget was ratings negative - on its own it does not justify further downgrades, but at the same time it also will not allay the concerns of the ratings agencies sufficiently to rule out further downgrades down the line," said Moolman.

    Basic services

    Gordhan said the government, which has faced a series of protests against poor basic services in the impoverished townships, would continue pouring money into infrastructure, education and the health service.

    Spending on social services, which have risen by 11 percent in the last five years, are expected to increase to 120 billion rand next year, said Gordhan.

    The rand weakened after the budget, and was last at 8.8850 against the dollar, from 8.835 before Gordhan began his address.

    Government bonds weakened, weighed down by plans to increase issuance to 165 billion rand a year during the next three years. The yield on the benchmark 2026 paper rose nearly 10 basis points to 7.31 percent.

    You May Like

    Syrian Rebel Realignment Likely as al-Qaida Leader Blesses Split

    Jihadist group Jabhat al-Nusra splits from al-Qaida in what observers dub a ‘deception and denial’ exercise

    New India Child Labor Law Could Make Children More Vulnerable

    Concerns that allowing children to work in family enterprises will push more to work

    What Take-out Food Reveals About American History

    Carry-out food explains a lot about the changes taking place in society, so here's the deal with pizza, Chinese food and what racism has to do with taking food to go

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Uganda Unveils its First Solar-powered Busi
    X
    July 28, 2016 4:16 AM
    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Philadelphia Uses DNC Spotlight to Profile Historic Role in Founding of United States

    The slogan of the Democratic National Convention now underway in Philadelphia is “Let’s Make History Again” which recognizes the role the city played in the foundation of the United States in the 18th century. As VOA’s Kane Farabaugh reports, local institutions are opening their doors in an effort to capitalize on the convention spotlight to draw visitors, and to offer more than just a history lesson.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.

    Special Report

    Adrift The Invisible African Diaspora