A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund and World Bank annual meeting in Tokyo in October 2012. Picture: REUTERS
A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund and World Bank annual meeting. Picture: REUTERS

THE World Bank on Monday joined the South African Reserve Bank in revising SA’s economic growth forecasts down, warning that poverty and unemployment remained stubbornly high.

In its outlook report for sub-Saharan Africa, the World Bank adjusted its economic growth forecast for SA for this year to 1.5%, the same as the Reserve Bank. For next year growth will be at 1.7% from 2%, and for 2017 2% from 2.4%.

World Bank lead economist for SA Catriona Purfield said at these growth rates, at least 14% of South Africans would remain in extreme poverty and unemployment would increase, given the threats to jobs in mining.

A strike is under way at coal mines, which, if protracted, could disrupt the delivery of coal to power stations and possibly hamper power generation.

Low economic growth in SA has been blamed on power outages, infrastructure backlogs and an unstable labour market.

"It is very important that the government try to work to improve labour relations and improve (the) policy environment so that investors could have more confidence to invest in the economy," Ms Purfield said.

Policy focus on small and medium businesses, services and exports were important for job creation, Ms Purfield said.

On Monday, a separate Standard Bank purchasing managers’ index (PMI) showed a fall to a 14-month low of 47.9 last month — indicating that operating conditions for private-sector companies had deteriorated for a fourth month in a row.

The growth rate for the rest of sub-Saharan Africa was forecast to decelerate from 4.6% last year to 3.7% this year — its lowest level since 2009 — mainly due to the slowdown in China, lower commodity prices, and electricity supply shortages.

Slowing growth meant sub-Saharan Africa would be the only developing region to miss global poverty reduction targets, World Bank acting chief economist Punam Chuhan-Pole said. "Much needs to be done to accelerate the pace at which poverty is being reduced," she said.

Growth in the sub-Saharan region is only forecast to accelerate slightly to 4.4% next year and to 4.8% in 2017.

On monetary policy, the report noted that although interest rate increases might help preserve price stability, they were likely to lower private credit growth and affect activity.

SA, Angola, Ghana, Kenya and Uganda recently raised rates on concerns that their weak currencies would stoke inflation.

There remained a 40% chance that the Reserve Bank could raise interest rates next month on "a considerable additional China and terms-of-trade shock", according to Nomura International’s senior emerging markets economist Peter Attard Montalto.

Sub-Saharan African countries, whose finances have been depleted from spending to support the economy, should raise taxes, reform tax administration, and simplify tax processes, said the World Bank.

Governments also needed to be more transparent about public spending and budgeting processes, and boost productivity in sectors such as agriculture, the bank advised.

Countries that would grow 7% and above included Ethiopia, Mozambique, Rwanda and Tanzania, mainly because of large investments in infrastructure, continued investment in the resources sector, and consumer spending.