US embassy cable - 05PRETORIA3528

UNCLAS PRETORIA 003528 
 
SIPDIS 
 
DEPT FOR AF/S/KGAITHER; AF/EPS; EB/IFD/OMA 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
TREASURY FOR OAISA/BARBER/WALKER/JEWELL 
USTR FOR COLEMAN 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, EFIN, ETRD, BEXP, KTDB, PGOV, SF 
SUBJECT:  SOUTH AFRICA ECONOMIC GROWTH RATCHETS HIGHER 
 
 
 1. South Africa's economy grew faster in second quarter 
 2005, primarily because manufacturing grew 7.3 percent 
 South Africa's real gross domestic product (GDP) at market 
 prices on a quarter-on-quarter, seasonally annualized and 
 adjusted basis increased by 4.8 percent in second quarter 
 2005 compared to 3.5 percent the previous quarter. 
 Government officials would like to believe that last 
 quarter's 4.8% growth is a harbinger of better things to 
 come.  While the 4.8 percent growth rate exceeded 
 expectations, the consensus forecast remains 4.4 percent 
 for the year.  It looks as if the South African 
 government's initial 2005 GDP forecast of 4.3 percent is 
 well within reach. End Summary. 
 
 Manufacturing Recovery 
 ---------------------- 
 
 2.  South Africa's economy grew faster in second quarter 
 2005, primarily because manufacturing grew 7.3 percent 
 after having declined 1.9 percent the previous quarter. 
 South Africa's real gross domestic product (GDP) at market 
 prices on a quarter-on-quarter (q/q), seasonally 
 annualized and adjusted increased by 4.8 percent in second 
 quarter 2005 compared to 3.5 percent the previous quarter. 
 The 4.8 percent growth rate exceeded expectations, with 
 the consensus forecast at 4.4 percent. 
 
 Growth Broad-based 
 ------------------ 
 
 3.  Though manufacturing led the charge by contributing 
 1.2 percent to second quarter growth, other sectors 
 contributed as follows: wholesale and retail trade, hotels 
 and restaurants, financial services, real estate, and 
 business services contributed 1.4 percent; transportation, 
 storage, and telecommunications contributed 0.6 percent); 
 agriculture, forestry and fishing contributed 0.3 
 percent); and general government services and personal 
 services contributed 0.3 percent.  The seasonally adjusted 
 real value added by the non-agricultural industries 
 increased by 4.7 percent during second quarter following 
 an increase of 3.5 percent in the first quarter of 2005. 
 
 A Reflection of Faster Growth to Come? 
 ----------------------------------- 
 
 4.  Since the 3rd quarter 1998, the country has 
 experienced 27 quarters of continuous growth, however, 
 only five have exceeded 4.5% on a seasonally adjusted, 
 annualized basis.  Growth in eleven quarters has exceeded 
 4.0%, and only two years (1996 and 2000) has exceeded 4.0% 
 growth.  Government officials would like to believe that 
 last quarter's 4.8% growth is a harbinger of better things 
 to come.  The government's stated objective for annual 
 growth is 6.0%.  President Mbeki has created a ministerial 
 led task force to fine tune the government's growth 
 policy, headed by Deputy President Mlambo-Ngcuka.  Mlambo- 
 Ngcuka and Trade and Industry Minister Mpahlwa were quick 
 to point to rising growth when addressing a visiting group 
 of prospective foreign investors.  They would like to 
 believe that the government's public sector led growth 
 strategy is beginning to yield results.  The real test 
 will be whether faster growth reduces the country's very 
 high rate of unemployment - those often problematic 
 statistics will not be available until September.  While 
 the 4.8 percent growth rate exceeded expectations for 
 second quarter 2005, the consensus forecast remains 4.4 
 percent for the year.  It looks as if the South African 
 government's initial 2005 GDP forecast of 4.3 percent is 
 well within reach. 
 
 
   TEITELBAUM