South Africa may sink into recession this year and shed many more jobs unless prompt action is taken to address the economy's biggest constraints: power shortages, labour militancy, poorly functioning parastatals and policy uncertainty. Analysts say these are all undermining confidence and investment.News this week that output contracted by 1.3% in the second quarter had many economists slashing their growth forecasts for the year down to around 1.5% from close to 2% - a development that will erode government revenues and finances, putting South Africa at risk of a credit rating downgrade.It also sparked speculation the Reserve Bank may hold off raising interest rates to subdue inflation fanned by the rand's plunge, which might erode its credibility in global markets and lead to more depreciation.Some economists fear growth will slow further next year and even contract in the third quarter of this year, fitting the technical definition of a recession."I think it's possible that we get another quarter of negative growth, particularly if there is a strike in the gold and coal industries. But whether we go into a technical recession or not, growth will be lower than our forecast of 1.7% this year, probably 1.5% or less," said FNB chief economist Sizwe Nxedlana.story_article_left1Stanlib economist Kevin Lings is more pessimistic - he expects the economy to expand 1.4% in 2015 and just 1.1% in 2016. "There is a real risk that South Africa experiences an outright recession over the coming quarters," he said.Figures released by Stats SA showed manufacturing contracted by 6.3% in the second quarter, and mining fell by 6.8% - outcomes that can be blamed on load-shedding and weak global demand for exports.Agriculture plunged by 17.4%, due to a drought that has hit maize hard. But the real surprise was a 0.4% fall in wholesale, retail and motor trade, along with catering and accommodation. The figures highlight a worrying decrease in consumer spending, the economy's main engine, and could reflect the impact visa regulations are having on tourism.Growth in the economy's biggest sector - finance, real estate and business services - slowed to 2.7% from 3.8% All the figures are seasonally adjusted and annualised.Statistician-general Pali Lehohla was unusually blunt at a news conference following the release of the GDP data, saying it indicated that South Africa was "continuously missing" its target of 5% annual growth."Those who set those targets must sit up and say: 'What are we going to do to ensure we get to that target?'" he warned.story_article_right2But many analysts believe the main problem is that the government, business and labour are at odds, making the appropriate implementation of agreed policy nearly impossible."Business on the one hand and government and labour on the other are leaning in different directions," said Econometrix chief economist Azar Jammine. "Business has a market-oriented perspective, while government and labour are more ideologically motivated, wanting greater intervention and regulation."Labour seemed to be on a destructive path to break down capitalism, which eroded business confidence and led to job-shedding, Jammine said. But the business model of maximising short-term returns as a yardstick for bonuses led to cost-cutting at the expense of jobs and small suppliers.Political analyst Steven Friedman said the government, business and labour all needed to compromise to tackle problems that had their origins in the apartheid era. It was impossible to negotiate a wage to satisfy employees when most of them were supporting up to 12 dependants. "People have to start bargaining - they must agree on three things: we can do a lot better, what am I prepared to give up, and what do I expect in return?" he said...