South Africa trims growth outlook as power crunch takes toll

South Africa trimmed its growth forecast for 2015 to 2.0 percent on Wednesday as chronic electricity shortages strangled economic activity, and the Treasury said that projection could halve if power outages worsened.
"There is a risk that the economic effect will be even more pronounced," the Treasury said in its 2015 budget review. It also cut its growth projection for 2016 to 2.4 percent, but left its 2017 forecast at 3.0 percent.
"Electricity constraints hold back growth in manufacturing and mining and also inhibit investment," Finance Minister Nhlanhla Nene said in his 2105 budget, delivered against the backdrop of the worst power outages since 2008.
Nene also said moderation in wage increases was necessary to spur faster growth and create more jobs, a warning to public sector union Nehawu which is in talks relating to demands for increases way above inflation.
The Treasury forecast inflation at 4.3 percent for 2015, and then 5.9 percent in 2016 as falling oil prices boost disposable incomes. It forecast 5.7 percent for 2017.
Lower inflation would lay the foundation for economic growth, Nene said, announcing a raft of programs that will put jobs spending north of 38 billion rand ($3.3 billion) over the next few years.
The benefits of a lower oil price will, however, come against weakening global growth, with weak export demand from China and the eurozone and projected household income growth of only 2 percent, the Treasury added.