Why has South Africa's economy stopped growing?

Wilting.

The World Bank announced today that they have reduced South Africa’s growth forecast for 2013 from 3.2 per cent to 2.5 per cent.

This follows poor results released earlier in the week which show that GDP growth for the first 3 months of 2013 slowed to 0.9 per cent.

The slowdown has a number of possible causes including the uncertainly caused by recent mine strikes and labour market disputes.

The World Bank said “firms are delaying investment and hiring decisions within the country until there is a rebound in private investment and household spending”.

Last week, the South African Reserve Bank decided to keep interest rates at 5.0 per cent. Their ability to reduce rates is of course limited by rising inflation which is linked to Rand weakness.

The South African Rand has depreciated by 16 per cent against the US dollar since the end of 2012 and reached a four year low of R9.84/US$ earlier this week.

This trend is also reflected in the valuation of local companies. In US dollar terms, the JSE all share index is down 5.7 per cent this year (between 31 Dec 2012 and 29 May 2013). This is alarming as most major worldwide exchanges are up significantly this year in US dollar terms: the MSCI world index is up 11 per cent and the Dow is up 17 per cent.

South Africa has a number of underlying issues that could impact on growth going forward. A recent report from WealthInsight highlighted the following major risks in the country:

  • Unemployment rates in South Africa exceed 24 per cent, which is well above the emerging market average. This is partly due to a relatively high degree of labour market rigidity with trade unions having a strong presence in the country. The apartheid government has also created a large pool of poorly educated people, contributing to widespread skill mismatches.
  • The ANC government’s close relationship with Robert Mugabe, the Zimbabwean president, is a concern both from an ethical and economic point of view. It is estimated that over four million Zimbabwean refugees have come into South Africa since the Zimbabwean crisis began in 1999.
  • Government corruption is a growing problem. This is likely to continue as the ANC’s dominance makes it difficult for other political parties to challenge ANC officials.
  • A relatively high crime rate, which deters foreign investors and tourists.
  • The HIV epidemic – it is estimated that 21.5 per cent of the adult population is HIV positive, which equates to over five million people. This places significant strain on South Africa’s long-term prospects, both from a social and economic point of view.
Photograph: Getty Images

Andrew Amoils is a writer for WealthInsight

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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