Mining & manufacturing may hamper SA 2012 growth

15 Dec 2011

According to Engineering News, Absa Capital argued in its latest quarterly economic outlook that the contribution of South Africa's mining and manufacturing sectors is likely to remain weak in 2012. The bank also cut its growth outlook for next year from 3.6% to just 2.8% and lowered its growth expectation for 2011 from 3.1% to 3%, in line with its expectations of lower growth in the rest of the world.

Lead South Africa economist Gina Schoeman said that mining and manufacturing - the two key productive sectors - remain a material drag on country's growth performance during the second and third quarters of 2011.

The outlook for 2012, Schoeman told Engineering News, was clouded further by persistently poor confidence levels, as well as by the uncertain business environment, which was expected to crimp investment. Therefore, even though fixed investment proved to be robust in the third quarter, expanding by 5.6%, the Barclays affiliate was "sceptical" on the 2012 outlook. Even though domestic consumer confidence was identified as a risk, particularly in light of higher inflation, the consumer was likely to continue providing the main growth impetus into 2012. At the same time, ABSA was not expecting a rate hike during the first three quarters of 2012

According to macroeconomist Jeffrey Schultz, as the European market consumed about 29% of South Africa's manufactured exports and 29% of it mining exports, a recession in Europe posed a material downside risk to companies exposed to the export market. On the other hand, an increasingly large export exposure to the rest of Africa and to Asia (with Africa accounting for 27% of SA's manufactured export, and Asia consuming about 58% of the country's mineral exports) could offer some respite.

Read the full article on www.engineeringnews.co.za.