SA economy looking good: IMF
Posted Thu, 09 Sep 2004
9 September 2004
The International Monetary Fund (IMF) is upbeat about South Africa's economy - and says a sustained growth rate of 3% or higher is possible over the next year.
Visiting IMF chief Rodrigo Rato said this week that the right fiscal and monetary policies were in place for sustained growth, but added that economic liberalisation should continue, including more privatisation and labour reform.
- Read Rato's statement on concluding his SA visit.
Rato's comments come amid growing pressure from labour unions in the public and private sectors. Recently, national telecoms operator Telkom was criticised by labour for planning to sack some 7 000 employees after announcing bumper results.
The government has also been head-to-head with public sector employees over wage increases, with unions threatening an "indefinite" national public sector strike.
Unemployment in South Africa is estimated at anywhere between 30% and 40%.
"By reforming the labour market, South Africa could achieve not only more economic growth in the future but also a reduction of the unemployment levels", Rato said.
According to Business Report, South Africa's annual growth rate has nearly doubled over the past 10 years, averaging 2.7% a year. The second quarter of 2004 has seen a sharp increase in growth to 3.9% - the fastest growth rate in nearly two years - up from 3.6% for the first three months of the year.
Rato, who met President Thabo Mbeki and Reserve Bank governor Tito Mboweni while in the country, said South Africa's economy is enjoying a recovery that should continue through at least 2005.
But he stressed that growth needs to be elevated to a "higher plateau" for there to be a significant fall in unemployment.
Some analysts have recently criticised the perspective that economic growth leads directly to widespread
job creation. They argue that economic growth in South Africa leads instead to speacialised employment, and does not necessarily affect the employment statistics of the unskilled majority.
But Rato insisted that it is possible that unemployment will be reduced at the current growth rate, especially if it is sustained over time. He said more flexibility in wage setting, reducing redundancy costs, and access to finance for small and medium-sized businesses would further boost the economy.
Rato also said the rand, which has strengthened considerably against foreign currencies over the past year, is valued "rationally" by the markets.
Business confidence highest in 7 years
The strong rand and interest rate cuts have boosted consumer confidence and have South African business smiling, with business confidence the highest since 1997.
Business confidence surged to 127.8 in August, up 5.3 points from 122.5 in July.
According to
the South African Chamber of Business (Sacob), which publishes the monthly confidence index, the disposable income of households after interest payments increased between June 2003 and December 2003. It said gross domestic expenditure has risen well above the increase in the domestic supply of local goods and services.
The easier financial position of households to some degree removed the necessity for households to borrow substantially more in order to finance spending outlays, the SA Press Association reports.
Sacob said upbeat consumer spending had boosted manufacturing production and sales volumes.
But it warned that business buoyancy was dependent on businesses finding ways to benefit from the increased spending and becoming more competitive.
"The consumer out there is having a good time at the moment", said Sacob economist Richard Downing.
SouthAfrica.info reporter
| 
