S Africa growth shrinks to 1.2% after mine strikes

Economic growth in South Africa more than halved to 1.2 percent in the third quarter as mining strikes ravaged the continent's largest economy, official data showed Tuesday. Growth slowed to its slowest level in more than three years, precipitously falling from the 3.4 percent rate seen in the second quarter. Economists had expected the a wave of deadly mining strikes between July and September to trim growth, but the scale of the decline was larger than expected. The unrest left at least 50 people dead and crippled production in the vital sector. "There is little in this data release to suggest much to be positive about," said Razia Khan, an economist with Standard Chartered Bank. "Chances are, the bad news from mining will last well into the fourth quarter of 2012 - perhaps even beyond." Statistics South Africa reported "lower production in all mining divisions" caused a 12.7 percent drop in mining and quarrying output. The finance and service sector, which accounts for around one fifth of South African output also saw slower growth. Statistics South Africa noted "slower increases" from the equity, bond and other financial markets, as well as the banking sector. As many countries in Africa enjoy unprecedented sustained growth, South Africa's economy risks becoming tripped up, with confidence hit by a series of ratings downgrades and sclerotic policymaking. Last week the South African Reserve Bank warned that growth would slow considerably in the coming quarters, noting the outlook had "deteriorated." The bank cut its growth outlook for 2013 dramatically from 3.4 percent to 2.9 percent. But with inflation predicted to peak at 5.7 percent in early 2013, the bank has little room to provide monetary stimulus. Meanwhile the government, which is already struggling to mend its tattered budget, has little leeway to provide fiscal stimulus. "South Africa appears to be stuck," said Khan. "It is going to take much bigger, more far-reaching policy decisions -- decisions that can impact positively on long-term confidence, to turn this around."