South Africa’s finance minister has predicted growth in the South African economy this year, but his comments have been widely dismissed

LEADING ECONOMISTS in South Africa have dismissed finance minister Trevor Manuel’s recent forecast of economic growth this year, saying the economy has already been pulled into recession by the global financial crisis.

Falling production and massive job losses have hit all the major sectors in the continent’s economic powerhouse over the past few months, while the global climate has had a major negative impact on exports.

Last week, Mr Manuel, who is widely accredited with rescuing South Africa’s economy in the aftermath of the apartheid era, which left the country financially crippled and in massive debt, said during his budget speech the economy would grow by 1.2 per cent this year.

The predicted growth level is the lowest in over a decade – which routinely saw annual growth of more than 5 per cent – and was revised down from a 3 per cent growth prediction made last October.

However, analysts believe the performances of various sectors tell a different story, and that Mr Manuel’s forecast for the coming 12 months is far too optimistic, and may well have been politically motivated.

The ruling African National Congress party is expected to face its stiffest political challenge since the transition to democracy 15 years ago, due to the high crime rate and a belief among many voters that party members are more interested in enriching themselves than helping the poor.

Many political analysts believe a combined opposition could break the former liberation movement’s absolute majority in parliament in April’s general election.

“There is a recession which is apparently masquerading as a growth slowdown, but should eventually be acknowledged for what it really is, even if this isn’t quite convenient going into a general election,” First National Bank chief economist Cees Bruggemans told reporters this week.

According to Mr Bruggemans, sectors that made up 80 per cent of economic output have declined significantly over the past 12 months, with manufacturing output declining 6.4 per cent year-on-year in November 2008 and 7 per cent last December.

One of the worst-hit industries has been the automotive industry, which has been used by economists and the government in recent years as a means to gauge the health of the economy.

Statistics recently released by the National Association of Automobile Manufacturers of South Africa show the overall number of vehicle sales last year were down to 488,951 from a high of just under 650,000 in 2006.

To date, General Motors South Africa has let go over 1,000 employees through a voluntary redundancy scheme.

Rival Ford has shed more than 800 staff as part of their efforts to remain competitive in the increasingly difficult economic environment.

Mphumzi Maqungo, the regional treasurer in the Eastern Cape province for the National Union of Metalworkers of South Africa, said the union received regular reports of automotive companies warning staff that retrenchments were likely to take place over the coming months.

“The bad news comes in daily and for every manufacturer who downscales production, their suppliers are also adversely affected,” Mr Maqungo told The Irish Times.

“In Port Elizabeth Well-fit Oddy, which makes wheel rims, will also be letting 550 employees go soon, which is half the plant.”