SOUTH Africa faces straining economic hardship as Europe’s debt crisis drags on and China’s growth slows. It is for this reason that the World Bank lowered South Africa’s growth forecast. The bank’s recent forecast on South Africa’s economy clearly indicates that it will likely grow 2.5% in 2012, less than the 2.7% expansion it had predicted in January of the same year.  Reserve Bank predicated that the economy will grow 2.7% in 2012, but warned that the forecast could be revised downward if growth slows globally. The World Bank says that a full-blown euro-zone crisis could cut 2.2 percentage points off South Africa’s growth in 2012.

A steep fall in commodity prices would also leave South Africa’s mining-backed economy particularly vulnerable, potentially shaving as much as 1.7 percentage points off growth in 2012. South Africa would be among the 10 countries to be hit most by the drop in commodity prices amongst developing countries. In a detailed assessment of the country’s steep income inequality and dysfunctional labour market, the bank wrote that the its growth has been too low to make up for the huge disparity in education and health services between rich and poor South Africans.

South Africa’s official unemployment rate is currently 25.2% and hasn’t fallen below 20% since the end of white-minority rule in 1994. To make up for the lack of opportunities for the country’s poorest residents, the government has instituted a sweeping social welfare program that provides 70% of the income for the poorest 20% of South Africans. Without that aid, the poorest 40% of the country’s 50 million people would actually have lower incomes today than in 1995.

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