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South Africa faces a shrinking economy
![South Africa faces a shrinking economy](https://biz-file.com/c/1405/196735.jpg)
This is a problem for South Africa for two reasons; firstly economic growth has been substantially driven by government spending on infrastructure and the like, and secondly, even this 'job creation' spending has resulted in neither jobs, nor meaningful economic growth. In fact, if the rate of inflation is factored in to existing growth numbers, the South African economy is actually shrinking.
The IMF has already cut South Africa's growth forecast for 2014 to 2.3% from 2.8%. With the strike in the platinum mining industry entering its 14th week, gross domestic product (GDP) growth for the first quarter of 2014 fell to 2%, much lower than the 4% in the equivalent quarter of 2013. This is not a scenario where employment opportunities will be created, nor where the private sector will be encouraged to invest.
Increase in imports
The weakness of the Rand has added to the Reserve Bank and government's woes as, although this has proved helpful to local industries such as mining, it has further weakened the balance of payments situation, as South Africa turns increasingly to imported goods and services.
The general consensus seems to be that, for political rather than economic reasons, there will be no interest rate hikes here until after the May elections. The effect that these rate hikes will have remains to be seen but the economy is playing a delicate balancing act now and without meaningful investment in industries that create jobs, whether by the private or public sector, it is hard to see how South Africa can take part in the economic recovery which seems to be spreading throughout the rest of the world.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of deVere Investments South Africa (Pty) Ltd or the deVere Group.
![Ross Pennell](https://biz-file.com/b/1502/466776-140x210.jpg)
About Ross Pennell
Ross is the founding CEO of Advent Wealth. Following a Business, Economics and Finance Honours degree at Loughborough University, Ross qualified as a Chartered Certified Accountant whilst working in Investment Banking in London. Ross' advisory experience covers the full spectrum of financial products and services including, inter alia, Insurance, Brokerage, Private Equity, Real Estate and Tax Structuring.![](https://cdn.bizcommunity.com/f/2408/Loeries-Tote-bag-competition.gif)
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