ECONOMY
SA growth of 6% achievable – IMF
Posted Fri, 14 Oct 2005
Growth rates of between five and six percent were achievable for South Africa over the long term, the International Monetary Fund (IMF) said on Thursday.
"It is a bold and ambitious target but achievable," the IMF's representative for SA and Lesotho, Vivek Arora, said in Johannesburg at the release of the Regional Economic Outlook report for sub-Saharan Africa.
The cabinet approved a report from Deputy President Phumzile Mlambo-Ngcuka's economic growth task team on Wednesday which wants the economy to be growing by six percent between 2010 and 2014.
The economy grew by five percent in the second quarter of this year, while the IMF and the Treasury expect growth of 4.3 percent for the whole year, up from the average of 3.7 percent in 2004.
At the moment the economy is being driven by strong domestic demand due in large to low interest rates. Arora said six percent growth would require the implementation of "policy measures" to improve public
enterprises, trade liberalisation and efficiency in the labour market.
The IMF believed the rand, which is currently around 6.60 to the dollar, was trading at a fair rate.
Michael Nowak, deputy director of the IMF's African department, said that South Africa's growth was one of the major contributors that was driving the rand's strength.
"On the basis of various objective criteria, we feel that the value of the rand is in line with South Africa's macro-economic fundamentals," he said.
Nowak blamed Zimbabwe for casting a cloud over the region. He said some investors were nervous about coming to the region because of the events in Zimbabwe.
"For foreign investors not aware of the politics that make up the region, what they see in Zimbabwe has the potential for spreading," Nowak said.
However, the Zimbabwean land invasions took place a long time ago and the initial concerns of investors that the situation might spread "had simply
not happened". Many had seen the progress that the South African economy had made in terms of growth.
Nowak said the sources of the funds that Zimbabwe used to settle a loan to the IMF were to be investigated. "A mission still needs to go to Harare to carry out that exercise," he said.
The Zimbabwean economy had shown remarkable resilience, but he doubted this could go on for much longer.
"Zimbabwe doesn't trade much with its neighbours anymore. Its economic output is limited. The outflow of labour is affecting all of its neighbouring countries.
"At some point, the Zimbabwean economy is going to grind to a halt. Rapid or urgent policy action is needed," he said.
According to the IMF's report, growth in sub-Saharan Africa (SSA) was expected to ease to 4.5 percent in 2005, down from 5.3 percent in 2004.
"The slowdown in 2005 is attributable primarily to lower growth in most of the oil producing countries following the exceptional
increases in oil production capacity in 2003 and 2004, especially in Nigeria," the report said.
Non oil-producing countries in SSA are expecting growth to average at about 4.5 percent. Average inflation in SSA had picked up to a projected 9.9 percent in 2005, with net oil importers had a difficult time in containing the inflationary pressure.
Inflation for SSA is expected to fall to 8.3 percent in 2006. Disturbing news in the report was the rate of growth in SSA would be insufficient to reduce poverty in the region.
"Growth in SSA remains below the levels observed in other developing country regions and is still insufficient for most countries to achieve the income-poverty Millennium Development
Goal."
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