South Africa's economic growth lags behind African average, reflecting close ties to Europe

JOHANNESBURG - Growth in the biggest economy on a continent where average growth is expected at 5.5 per cent is expected at only about 2.7 per cent this year, South Africa's finance minister said Wednesday, calling for new thinking to get through a global crisis.

The 2.7 per cent figure, cited by Finance Minister Pravin Gordhan as he presented South Africa's 2012-13 budget, reflects close links between South Africa and struggling industrialized nations.

Global growth this year is expected at 3.3 per cent, led by Asian developing countries that are expected to grow by 7.3 per cent, and sub-Saharan Africa by an average of 5.5 per cent. South Africa, with markets for many of its products in Europe, will lag, but still be ahead of advanced economies that are expected to grow at only 1.2 per cent. Growth in South Africa has averaged about 3 per cent a year since 2009.

South Africa has to do more business with the rest of the continent, and better position itself as Africa's economic gateway, Gordhan said.

"To succeed in this environment, we have to seize the opportunities presented by this changing world," he said.

He added South Africa's mining sector, weakened by years of under-investment and other problems, should be benefiting more from high commodity prices, and that the country should take better advantage of rising demand for agricultural and factory goods.

"Some 85 million manufacturing jobs in China will shift to other countries over the years ahead," he said. "Do we have the right policies, conditions and boldness to enable South African businesses to gain from these immense shifts in the patterns of production and trade?"

Gordhan also gave some details on an infrastructure development plan President Jacob Zuma announced earlier this month that is meant to spur growth and create jobs. Gordhan says his government is looking to private investors to help pay for some projects, and will borrow and raise some taxes.

Gordhan outlined total spending of 969.4 billion rand (about $125.9 billion) in 2012-13.

He predicted the 2012-13 budget deficit of 4.6 per cent of GDP, and said he hoped to reduce that to 3 per cent in 2014-15. He expected public debt to stabilize at about 38 per cent of GDP.