Labour strife, weak investment and lagging confidence were likely to mute gross domestic product (GDP) growth for 2013, unless deep structural reforms and policy certainty emerged, banking group Absa commented on Thursday.

Absa Corporate and Investment Bank had lowered its 2013 GDP growth forecast from 2.3%, to 2%, and its 2014 forecast from 3.2% to 2.8%, macro economist Peter Worthington said.

Industrial action in the motor vehicle, gold mining and fuel retailing sectors would hamper third-quarter growth, which would likely register a 2.1% growth rate, he stated at a briefing discussing Absa’s Quarterly Perspective report.

Quarterly growth would probably pick up in the fourth quarter, barring no further strike action, and was unlikely to increase much more than the forecast 2.5%. This followed a marginal 0.9% quarter-on-quarter expansion in the first quarter, after a very poor performance in the manufacturing sector, before rebounding to a 3% growth during the second quarter.

Despite government intervention softening the impact of labour strike action in the mining sector this year, mining houses remained “particularly pessimistic” on the back of ongoing poor labour relations and regulatory uncertainty, said Worthington, referring to the uncertainty wrought by the draft Mineral and Petroleum Resources Development Act Amendment Bill.

Further, strike action flared in the manufacturing sector to the point where BMW said it would halt further investment in South Africa.

Newswire Reuters had reported that some firms were reconsidering how much to invest in South Africa after prolonged labour tensions, and had quoted BMW spokesperson Guy Kilfoil as saying: "The fact that the strike went on for four weeks is proof-perfect that the labour environment in South Africa in inherently unstable.”

“Investment is key, particularly infrastructure, but private sector confidence is very subdued,” Worthington commented.

For business confidence to improve to attract adequate investment to set the economy back on track, signs that the infrastructure bottlenecks and capacity constraints, such as electricity and transport constraints, were being alleviated were required.

Fractured labour relations also required strong cooperation between labour and business, led by strong government leadership.

The prevailing environment was deterring new investment and had stunted the investment strategies of companies already operating in South Africa.

“The economy needs deep structural reforms to labour and product markets to grow faster,” he said. But the elections in the second half of 2014 had put on hold many essential reforms, including those mooted in the much anticipated implementation of the National Development Plan.

“The public infrastructure programme remains the only bright spot in our investment outlook, with planned spend of R1.08-trillion over the next three years and R3.6-trillion over the next ten years.”

But the public sector accounted for the minority of gross domestic fixed investment at just 38% in 2012, while implementation of projects remained a concern.

“Medupi shows that the public sector is not very good at delivering large infrastructure projects on time and within budget,” he concluded.