South Africa Factory Growth Encouraging, Minister Says
South African Trade and Industry Minister Rob Davies said he is encouraged by the pace of growth in manufacturing output and the economy may grow faster than forecast in the first half.
“I am encouraged by the figures we saw,” Davies said in an interview at a trade conference in Sun City, South Africa, today. “There are some signs that some of the worst expectations for the first half of this year won’t come to fruition.”
The manufacturing industry, which accounts for about 15 percent of the economy, expanded 4.1 percent in February, the quickest pace since September. Finance Minister Pravin Gordhan said on April 1 the economy will probably grow faster than his previous estimate of 2.7 percent. The Reserve Bank last month raised its forecast for growth in 2012 to 3 percent.
A weaker rand exposes the economy to the impact of a higher oil price, though the decline last year may help manufacturers, Davies said.
“The rand where it is now is a degree of comfort to manufacturers, more so than when it was overvalued,” he said.
South Africa’s rand fell 18 percent against the dollar in 2011, the most of 16 major currencies tracked by Bloomberg. It has gained 1.9 percent since then.
Davies said an agreement on the cost of iron ore from the Sishen deposit is taking “too long.”
The government wants to ensure 21.4 percent of iron ore from the country’s Sishen deposit is available to local manufacturers at cost plus 3 percent.
In March 2010, Anglo American Plc (AAL)’s Kumba Iron Ore Ltd. (KIO) unit said a 2001 agreement to supply 6.25 million metric tons of ore a year from Sishen to ArcelorMittal (MT) South Africa Ltd. at cost plus 3 percent lapsed. In December last year, the High Court ruled that Kumba was awarded a 100 percent right to the Sishen mine.
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