By Hassan Isilow
JOHANNESBURG (AA) - South Africa announced Wednesday that it has cut its economic growth forecast for 2020 by around half.
“We forecast that the South African economy will grow by 0.9% and inflation will average 4.5% in 2020,” Finance Minister Tito Mboweni said in a televised budget speech from parliament in Cape Town.
Last year, Africa’s most industrialized economy projected economic growth of 1.7% in 2020. But a number of factors, including a revenue shortfall, debt and persistent electricity shortages, have stagnated growth.
“Over the next three years, we expect growth to average just over 1%,” Moboweni said, adding “a stable supply of electricity will be our number one task.”
South Africa has been experiencing rolling power cuts for months as state power utility Eskom, which supplies nearly 95% of the country’s electricity, struggles with ailing coal-fired power plants.
But Moboweni expressed optimism that over the next 18 months, South Africa’s economy might get a number of jumpstarts to create growth due to conducive strategies such as a recently announced reduction in interest rates and impending change to the electricity regulatory framework.
He also announced that the state will cut around 160 billion rand ($10.5 billion) from civil servants’ pay in the next three years to reduce public debt.
He also called for controlled spending for government employees, including using economy class flights for those traveling on government duty.
He said reducing pay rises and promotions of civil servants will enable the government to save 37.8 billion rand ($2.4 billion) in the next financial year.
“Mr. President, you have directed your government to deal with wasteful expenditure. This is a vital step in restoring the confidence of the public in the government. We must get more value for our money,” he said.
He also noted that there will be a shortfall in revenue collection this year, expecting to collect 63.3 rand billion ($4.1 billion) less than projected. This year’s budget deficit is forecast at 6.8% of gross domestic product (GDP), the widest in 25 years, hence treasury’s move to reduce spending.