The growth rate of the South African economy more than halved in the first three months of the year, official data showed on Tuesday, after a series of power cuts hit output in the key mining sector.

Figures from Statistics South Africa showed growth at 2.1 percent on a 12-month basis, down sharply from 5.3 percent in the last quarter of 2007.

Analysts had expected a large fall in growth but most were not anticipating anything on this scale.

Production in the mining sector plunged 22 percent.

"The energy crisis and the forced closure of the mines have far outweighed any beneficial impact from higher commodity prices," commented Razia Khan, Africa analyst for Standard Chartered bank.

South Africa's electricity crisis began in January when power utility Eskom, which produces 95 percent of the country's electricity, began a series of power cuts because of a lack of capacity.

The outages caused an initial total shutdown of mines before they resumed production at lower levels and delayed large construction projects.

The South African government has forecast a slowdown in growth this year to 4.0 percent after several years of expansion above 5.0 percent.

The sharp slowdown comes at a bad time for the government, which was already under fire over its handling of an outbreak of deadly anti-immigrant violence that has left more than 50 dead and 35 000 people displaced.

It also coincides with high inflation and central bank governor Tito Mboweni indicated last week that interest rates are set to climb further after a series of increases.

Some analysts are pencilling in a rise of 50-basis-points when the bank meets on 11 and 12 June which would take the main rate to 12 percent.

"Further steps cannot be ruled out"

"Further steps cannot be ruled out," Mboweni told a conference in Johannesburg last week.

The electricity shortages have been caused by underinvestment in new production capacity by state-run Eskom and have caused embarrassment for the government.

Eskom has asked the regulator to approve a highly controversial 53-percent hike in electricity prices to finance the building of new power stations but the demand has sparked public outrage and fears about its impact on inflation.

Khan of Standard Chartered said it was important to put the weak first-quarter performance in context.

"Although mining growth should remain subdued given the energy sector problems, a repeat performance that is anything as weak as this is somewhat improbable," she said.

Eskom suspended its power cuts at the end of April.

"The GDP (gross domestic product) data shows that both mining and manufacturing are under pressure," said analyst Russell Lamberti of Econometrix Treasury Management.

"The GDP figure was influenced by power outages, the rate hikes and of course the general mood in the global economy," said Dennis Dykes, an economist at Nedbank.

"We'd expected GDP to come in at 2.0 percent — so it's no surprise but I know the market was anticipating a bit more."

AFP