SA’s economy to bounce back if mining strikes kept at bay

By Vuyani Ndaba

JOHANNESBURG (Reuters) – South Africa's economic growth will probably accelerate next year if labour relations don't deteriorate again and if the global economy holds up reasonably well, a Reuters poll found on Thursday.

In a survey taken in the past week, the median forecast from 35 economists suggests growth will pick up to 2.5 percent in 2015 from an estimated 1.5 percent this year.

"Obviously this assumes that we are not going to have another strike in the mining sector. If that happens, all bets are off," said Dennis Dykes, chief economist at Nedbank, referring to crippling nationwide industrial unrest this year.

Fractured labour relations in Africa's most developed economy disrupted the mining and auto sectors and hurt business confidence in the first half of the year.

That impact is still being felt, although economists think growth has a good chance of rebounding next year from a long period of disappointing performance.

Still, South Africa's jobless rate remains uncomfortably high, with almost a quarter of the labour force consistently unemployed since the 2007-2008 recession.

Economists say major reforms in the labour market and skills development are fundamental requirements to bring the jobless rate down in a country where growth has been very slow for several years.

Nedbank's Dykes said in order for growth to pick up, a lot of other things needed to happen, including Europe avoiding another recession and China continuing to grow by around 7 percent.

The latest Reuters global poll of economists, of which the South Africa survey is a part, showed forecasters downgrading their estimates for next year.

Just under half of economists' forecasts for South African growth were at or below the International Monetary Fund's 1.4 percent prediction, with the lowest at 1.2 percent.

Consumer inflation, like in other parts of the world, is expected to ease, averaging 5.7 percent next year from an estimated 6.2 percent this year.

The South African Reserve Bank, which aims to keep inflation between 3 and 6 percent, is expected to raise rates by another 25 basis points to 6.0 percent before the end of this year. The bank has already lifted rates 75 basis points this year.

Rates are expected to further rise to 6.5 percent next year before reaching 7.0 percent in 2016, a level last seen nearly five years ago.

Falling oil prices, while tough for oil-exporter Nigeria, may help South Africa. The price of Brent crude has tumbled over the last few days to trade below $83 a barrel, the lowest since 2010.

"Lower oil prices may help to improve balance of payments positions and ease concerns about the potential effects of Fed tightening," said Neil Shearing, chief emerging markets economist at Capital Economics.

The U.S. Federal Reserve is expected to raise interest rates no later than July of next year, putting emerging market economies on a tightening path regardless of weak growth.

But recent convulsions in financial markets have led some to speculate that eventual rate rise may be later than economists currently expect.