24 January 2003

The International Monetary Fund (IMF) has praised South Africa’s economic management, saying the country is poised to achieve 3% economic growth in 2003.

In its 2002 Article IV Staff Report on South Africa, released on 23 January, the IMF said that South African authorities continued to implement sound monetary and fiscal policies between 2001 and 2002.

The Washington-based institution said South Africa’s government finances continued to be strong, particularly at the levels of the central and provincial governments.

"During the year under review, revenue collections over-performed, expenditure management was enhanced by new legislation, and a lower-than-budgeted deficit was recorded due to robust economic growth," the report noted.

"The exchange rate depreciated sharply toward the end of 2001. The exchange rate, however, regained all of this lost ground during 2002. In this regard it should be noted that the rand was the best-performing currency against the US dollar during 2002, gaining 38%."

Money Market Services economist George Glynos said although the IMF report was not something new, it was positive news. "It has always been noted that our fundamentals are in place and also that we are heading for an economic success as a country.

"The report suggests that government is doing a fairly decent job through prudent policies. The state has stuck to its objectives and policies throughout ,and this means we are going to, in time, attract massive foreign direct investment," Glynos added.

Mattys Strauss, market strategist for Amalgamated Banks of South Africa, said an outstanding feature of the IMF report was the Reserve Bank’s support for exchange controls. He said the country had adopted a slow liberalisation policy towards exchange controls.

The exchange controls give South Africans a limit of only R750 000 for offshore investment.

The IMF report also noted that conditions in the labour market had improved with the introduction of legislation to streamline the arbitration process and allow for more flexibility in employment.

"Better regulation of the wage bargaining process resulted in a substantial decline in man-hours lost from labour disputes; government is pursuing the process of restructuring state assets vigorously," the report stated.

It noted that social development indicators show an increase in the living conditions of the poor. While HIV-Aids is still prevalent in the country, the rate of increase has stabilised.

The report also said that South Africa continued to play a leadership role in the African continent through various initiatives, including the economic recovery plan, the New Partnership for Africa’s Development (Nepad), and through contributions to the peace process in conflict countries.

In November 2002 the economic evaluator Standard and Poor's revised its outlook on South Africa's economic ratings from 'stable' to 'positive'. In August 2002, Fitch Ratings also revised the outlook on South Africa's foreign currency debt from 'stable' to 'positive'.

And in November 2001 another agency, Moody's, upgraded the country's long-term foreign currency debt rating from Baa3 to Baa2 and hiked the government's domestic debt rating by two notches from Baa1 to A2.

Source: BuaNews