Cape Town--The South African government raised taxes and scaled back spending plans in its annual budget Wednesday as Africa's most developed economy wrestles with stalling growth, rising debt, power blackouts and rampant unemployment.
Projected economic growth for 2015 is just 2.0 percent, down from 2.5 percent forecast in October last year, Finance Minister Nhlanhla Nene told parliament.
Growth in 2014 was 1.5 percent, dragged down by prolonged labour strikes in the key mining sector, prompting Nene to warn recently that the economy was "at a turning point".
The growth rate is far below the six to seven percent many economists believe South Africa needs to provide jobs for millions in a country where one in four people is unemployed.
The most important challenges facing the economy are unemployment and the security and reliability of the energy supply from the troubled state-owned provider, Eskom, said Nene.
"Electricity constraints hold back growth in manufacturing and mining, and also inhibit investment in housing and raise costs for businesses and households," Nene said.
The failure to maintain existing power plants and build new ones in time to meet extra demand has led to rolling power blackouts and analysts say it could be years before capacity can fully meet demand.
Eskom will receive a capital injection of 23 billion rand ($2 billion) this year and electricity tariffs will be increased in an effort to stabilise the power utility's financial position, Nene said.
The cash is expected to be raised through the sale of non-strategic government shareholdings in some state-owned companies.
While shunning the word privatisation, Nene said "private investment and partnerships with state-owned companies are elements of our strategy for strengthening infrastructure investment and improving service delivery".
The minister provided no details of what state assets might be sold.
AFP
