The International Monetary Fund on Tuesday said South Africa's growth prospects will improve slightly in the coming year, but remain too weak to curb chronic unemployment in the continent's most advanced economy.
"The growth and jobs outlook remains lacklustre, with growth projected at two percent in 2015–16" -- up from 1.5 percent in 2014 -- the fund said in report after a routine assessment visit to South Africa.
Power outages risk being the biggest brake on the country's economic growth.
"As the electricity crisis has deepened, only a muted recovery to two percent growth is expected in 2015–16 mainly due to the anticipation of fewer days lost to strikes."
"Severe electricity shortages, the worst since 2008, have become the greatest obstacle to growth, reducing economic activity, sapping confidence, and discouraging investment," said the fund.
Joblessness rate hit 26.4 percent in the first quarter of 2015, the highest level in 11 years.
IMF forecasts that unemployment will remain above the 25 percent mark in the coming year, unless government rolls out major policy changes.
Inflation, which hit a four-year low in February of 3.9 percent on the back of low oil prices, "is projected to rebound to 6.1 percent in 2016," said the IMF.
The IMF also cautioned South Africa over its new immigration laws, which it says could hinder the country's access to much needed skilled expatriate personnel.
"Some recent measures -- for example, new regulation for visas for certain skilled workers and restrictions on temporary employment -— risk depressing growth and job creation," said the IMF.
The IMF also said South Africa continued to underperform peer emerging markets.
The government acknowledged the existence of domestic factors that were hampering growth and said it was addressing them, including the electricity constraints.
"Many of these structural reforms will take time to implement, however initiatives are already underway and the government is committed to the long-term development of our economy," the national treasury said in a statement.