Cape Town, South Africa — 26 October 2012 – The government of South Africa has cut its growth forecast and predicted a wider budget deficit, citing as the main reasons fallout from the worst mining strikes since apartheid and a lack of infrastructure investment.
Reuters reports, however, that finance minister Pravin Gordhan sought to allay fears of a meltdown in Africa’s biggest economy, telling Parliament here that the country remained on a firmer footing than most of the developed world, and dismissing downgrades by Moody’s and S&P as “inappropriate”.
About 100,000 workers, mainly in the mines, have downed tools for better pay since August in a wave of strikes that has sparked credit downgrades by ratings agencies Moody’s and Standard and Poor’s.
The National Treasury cut the 2012 growth forecast to 2.5% from the 2.7% of earlier in the year, citing the impact of nearly three months of strikes in the platinum and gold mines, as well as structural constraints.
In a document outlining the budget for the next three fiscal years, it raised the projected 2012/13 budget deficit to 4.8% of GDP, in line with a Reuters poll of economists. The Treasury had previously forecast a deficit of 4.6%.
Offshore investors have been worried that three months of mining labour unrest would put pressure on Gordhan to increase spending to try and ease some of the social tensions that led The Economist magazine to run a cover story last week entitled “Cry the Beloved Country – South Africa’s sad decline.”
But a combative Gordhan stressed that Pretoria would not deviate from its current spending plans and vowed to keep total debt at a peak of 39% of GDP by 2015/16.
Comparing debt levels he said: “Just for the sceptics among us “’ 39%. Not the 90% of European countries or the 200% of Japan or the 120% of Italy. Thirty-nine percent,” Gordhan told parliament.