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Growth

Strikes cause South Africa's economy to contract

South Africa's recovery from the global recession is faltering, economic data showed Tuesday. Africa's most advanced economy is languishing under low output from its strike-hit mining sector and a drop in manufacturing.

South Africa has logged its worst economic performance in five years as low output from its strike-hit mining sector caused a 0.6 percent contraction in the first three months of the year, official data showed Tuesday.

The unexpected reversal in Africa's most advanced economy came amid a protracted and costly strike in the country's platinum mining sector. #vThat strike#is now in its fifth month and has driven a 24.7 percent quarter-on-quarter decline in mining output - the biggest quarterly contraction in nearly 50 years.

"This makes for grim reading," said Razia Khan, the regional head of research for Standard Chartered Bank in Africa.

Slow recovery

Union tells SA strikers to 'stay strong'

South Africa has been at pains to recover from the global recession since it hit five years ago. With unemployment topping 25 percent and inflation rising, trouble in the country's mining sector and a drop in manufacturing could tarnish confidence in the overall economy.

"The weakness mainly came from a sharp plunge in mining production," analysts at Nedbank said. "But the economy's fragility was on display in most other sectors too.

The rand fell nearly 1 percent against the dollar upon the release of Tuesday's data.

Tough times ahead

If South Africa's economy continues to underperform it could scuttle attempts by the new finance minister, Nhlanhla Nene, to get the country's finances in order amid threats of a credit rating downgrade.

Nene, whose first day on the job was also Tuesday, is South Africa's first black finance minister.He has been tasked with overseeing major social and economic reforms by the freshly elected president, Jacob Zuma.

Khan, the bank researcher, said the contraction made these reforms "even more of an imperative."

"In their absence, growth might continue to languish at these weak levels," he said.

cjc/kpc (AFP, Reuters)

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