The electricity crisis, the global economic climate and structural weaknesses in the economy are some of the constraints that contributed to South Africa's slow economic growth, reveals the Medium-Term Budget Policy Statement (MTBPS).
Finance minister Nhlanhla Nene today delivered his budget speech in Parliament, which revealed a grim portrait of the country's economic outlook.
"The economy has grown slower than projected. The expected economic growth rate for 2015 will reach 1.5% and not the 2% that was projected earlier this year," Nene stated.
According to Nene, the growth in the economy was considerably lower, which meant government had to adjust the economic outlook. He also noted economic growth is expected to increase to 1.7% next year.
Lights out
Although national power utility Eskom is in the process of turning its energy supply challenges around, it appears to be one of the main barriers to growth of the country's economy.
In terms of the MTBPS, electricity supply constraints not only affected homes and businesses around the country, but also resulted in growth forecasts being revised lower.
Nene noted there is still a long way to go in building energy security in SA.
"Investment growth will be just 1.2% this year. Limited employment growth and household income constraints are holding back consumption," he said.
"If we do not achieve growth, revenue will not increase. If revenue does not increase, expenditure cannot be expanded."
Despite the grim economic outlook, Nene does not expect a downgrade of the country's economy from the ratings agencies.
Looking ahead
The South African government implemented the National Development Plan (NDP) in 2012, which aims to boost economic growth and employment.
The NDP aims to raise resources needed to support social and economic transformation in the country.
The finance minister stated the NDP is still the plan of action and government remains committed to it to ensure improvement in the economy.
"There is a plan. The plan is three years old now and is in the process of being implemented but we need to accelerate this plan."
According to Nene, the country has to sustain progress in a low economic growth environment and must be committed even during a challenging environment.
Nene called on the private sector to jump on board to ensure progress and success of the country's economy. Some 70% of the economy is in the private sector, he noted.
"We won't be able to grow our economy unless the private sector is on board."
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