The South African economy will grow by a slower 2.5 percent this year after wildcat mining strikes cost $1.2 billion and dimmed the outlook for Africa's powerhouse, Finance Minister Pravin Gordhan said on Thursday.
Gordhan lowered his forecast from the previous level of 2.7 percent amid a mining crisis that has rippled across the industry, weakened prospects in key export destination Europe and decelerating business activity in China and India.
"Economic growth in South Africa has slowed to just 2.5 percent this year, held back by both global uncertainty and disruptions to domestic production," Gordhan said as he presented revised budget estimates.
The new forecast is half of that expected for sub-Saharan Africa as a whole and comes after two rating agency downgrades for South Africa, prompting Gordhan to take a swipe at pessimism hovering over the country.
"There's no catastrophe that is going to hit our country at this point in time. There's no need in my view for the pessimism that some of us seem to be reflecting," he told journalists.
But the total value of lost production in platinum and gold mines this year was already about 10.1 billion rand ($1.2billion, 900 million euros).
Gordhan also hit out at accusations that the continent's wealthiest country is on a downward slope under the ruling African National Congress led by President Jacob Zuma who is bidding for re-election in year-end internal party polls."I think that there are too many people who are outside of this country who are making judgment calls on this country, who don't understand our history well enough," Gordhan said before addressing parliament.
He charged that such critics "don't understand where we come from as a country as a political culture," and added that they "make negative pronouncements way out of line, way out of line, with the realities of political developments in this country."
"We are fiscally safe, we are not about to fall over any cliff," the finance minister added in a possible reference to the looming threat of automatic tax increases and spending cuts in the United States.
Gordhan also revealed that the country's public deficit rose 0.6 percentage points to 4.8 percent of output this year owing to lower revenues, while public debt rose almost three points to 35.7 percent of gross domestic product (GDP).
South Africa ramped up spending after falling into its first post-apartheid recession in 2009, which led to a dramatic widening of the deficit after posting a surplus five years ago.
"We have added more than one trillion rand to government's debt, because of the recession," said Gordhan.
"Despite the fiscal stimulus, reinforced by accommodative monetary policy, South Africa's economic recovery has been tepid. Investment, trade and employment growth have remained hesitant."
Forced stoppages at several global mining giants since August have battered exports, curbed revenues and hit the nation's current account, with that deficit set to surge to 5.9 percent of GDP from 3.3 percent last year.
"We say very clearly that the problems in the mining area do reflect upon our growth prospects and it's going to still take us some time to understand what the full impact on the growth is, depending how and when these strikes actually end," Gordhan told reporters.
The widespread mining strikes which flared out of a deadly six week stand-off at platinum miner Lonmin had a significant effect on the economy, according to the Treasury's medium term budget policy statement which Gordhan presented.
"The events at Lonmin's Marikana mine and the spread of industrial action since August have dented confidence and lowered growth prospects for the remainder of the year."
Beyond cuts to mining production, the strikes have also hit related industries such as manufacturing, hobbling overall GDP, tax revenues, exports and jobs.
"The impact will be larger if strike activity is protracted," the budget statement warned.
Shunning austerity measures despite falling revenues, the Treasury says spending will not be cut but yearly increases reined in and funds re-allocated.