Economic growth in South Africa will continue to be fuelled by consumers as their incomes rose, according to trade and industry minister Mandisi Mphahlwa. Addressing parliament this week Mphahlwa said that the South African economy had undergone structural changes, such as higher levels of participation in the economy and rising incomes, and that consumer spending would be resilient.

Data released by Statistics South Africa this week showed that the main indicator of consumer spending, retail figures, dropped to a six-year low in December 2007, as higher interest rates began to bite on disposable income and household spending.

While consumer spending has been the engine behind economic growth in the last few years, allowing GDP increase to touch 5.4% in 2006, it also contributed to higher CPIX inflation. This in turn led the South African Reserve Bank to raise interest rates by 4% between June and December last year.