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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To stop Jeremy Corbyn, I am giving my second preference to Andy Burnham

The big question is whether Andy Burnham or Yvette Cooper will face Jeremy in the final round of this election.

Voting is now underway in the Labour leadership election. There can be no doubt that Jeremy Corbyn is the frontrunner, but the race isn't over yet.

I know from conversations across the country that many voters still haven't made up their mind.

Some are drawn to Jeremy's promises of a new Jerusalem and endless spending, but worried that these endless promises, with no credibility, will only serve to lose us the next general election.

Others are certain that a Jeremy victory is really a win for Cameron and Osborne, but don't know who is the best alternative to vote for.

I am supporting Liz Kendall and will give her my first preference. But polling data is brutally clear: the big question is whether Andy Burnham or Yvette Cooper will face Jeremy in the final round of this election.

Andy can win. He can draw together support from across the party, motivated by his history of loyalty to the Labour movement, his passionate appeal for unity in fighting the Tories, and the findings of every poll of the general public in this campaign that he is best placed candidate to win the next general election.

Yvette, in contrast, would lose to Jeremy Corbyn and lose heavily. Evidence from data collected by all the campaigns – except (apparently) Yvette's own – shows this. All publicly available polling shows the same. If Andy drops out of the race, a large part of the broad coalition he attracts will vote for Jeremy. If Yvette is knocked out, her support firmly swings behind Andy.

We will all have our views about the different candidates, but the real choice for our country is between a Labour government and the ongoing rightwing agenda of the Tories.

I am in politics to make a real difference to the lives of my constituents. We are all in the Labour movement to get behind the beliefs that unite all in our party.

In the crucial choice we are making right now, I have no doubt that a vote for Jeremy would be the wrong choice – throwing away the next election, and with it hope for the next decade.

A vote for Yvette gets the same result – her defeat by Jeremy, and Jeremy's defeat to Cameron and Osborne.

In the crucial choice between Yvette and Andy, Andy will get my second preference so we can have the best hope of keeping the fight for our party alive, and the best hope for the future of our country too.

Tom Blenkinsop is the Labour MP for Middlesbrough South and East Cleveland