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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Tackling tuition fees may not be the vote-winner the government is hoping for

In theory, Theresa May is right to try to match Labour’s policy. But could it work?

Part of the art of politics is to increase the importance of the issues you win on and to decrease or neutralise the importance of the issues your opponent wins on. That's part of why Labour will continue to major on police cuts, as a device to make the usually Labour-unfriendly territory of security more perilous for the Tories.

One of the advantages the Conservatives have is that they are in government – I know it doesn't always look like it – and so they can do a lot more to decrease the importance of Labour's issues than the Opposition can do to theirs.

So the theory of Theresa May's big speech today on higher education funding and her announcement of a government review into the future of the university system is sound. Tuition fees are an area that Labour win on, so it makes sense to find a way to neutralise the issue.

Except there are a couple of problems with May's approach. The first is that she has managed to find a way to make a simple political question incredibly difficult for herself. The Labour offer is “no tuition fees”, so the Conservatives essentially either need to match that or move on. But the one option that has been left off the table is abolition, the only policy lever that could match Labour electorally.

The second, even bigger problem is that it it turns out that tuition fees might not have been the big election-moving event that we initially thought they were. The British Electoral Survey caused an earthquake of their own by finding that the “youthquake” – the increase in turn-out among 18-24-year-olds – never happened. Younger voters were decisive, both in how they switched to Labour and in the overall increase in turnout among younger voters, but it was in that slightly older 25-35 bracket (and indeed the 35-45 one as well) that the big action occurred.

There is an astonishingly powerful belief among the Conservative grassroots, such as it is, that Jeremy Corbyn's NME interview in which the he said that existing tuition fee debt would be “dealt with” was decisive. That belief, I'm told, extends all the way up to May's press chief, Robbie Gibb. Gibb is the subject of increasing concern among Tory MPs and ministers, who regularly ask journalists what they make of Robbie, if Robbie is doing alright, before revealing that they find his preoccupations – Venezuela, Corbyn's supposed pledge to abolish tuition fee debt – troublingly marginal.

Because the third problem is that any policy action on tuition fees comes at a huge cost to the Treasury, a cost that could be spent easing the pressures on the NHS, which could neutralise a Labour strength, or the financial strains on schools, another area of Labour strength. Both of which are of far greater concern to the average thirtysomething than what anyone says or does about tuition fees.

Small wonder that Team Corbyn are in an ebullient mood as Parliament returns from recess.

Stephen Bush is special correspondent at the New Statesman and the PSA's Journalist of the Year. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.