IMF warns South Africa

THE International Monetary Fund (IMF) wants the South African government to create an environment that is conducive for investment and implement much-needed structural reforms to boost the ailing economy, National Treasury said on Monday following a visit by the lender.
The IMF visited South Africa (SA) from 6 – 21 November to discuss economic and financial developments as part of its bi-annual surveillance function.
“The IMF recommends that SA creates an environment conducive for private sector investment and take a decisive approach to implement structural reforms in order to boost economic growth,” said a statement.
According to Treasury, the global lender also highlighted the major challenges facing the economy, which include weak growth, a deteriorating fiscal situation and difficulties in the operations of State-owned enterprises (SOE)s.
In October, Treasury downgraded growth forecast to just 0,5 percent for this year, down from the 1,5 percent projection made in the February, as the economy battles high unemployment and a rising public service wage bill.
The country’s loss-making public entities also continue to put pressure on the public purse, with government constantly extending bailouts and guarantees to support the companies. The impact of continued support has been flagged by ratings agencies who have called for urgent reforms to address the current economic malaise.
Treasury said the proposal raised by the IMF were in line with areas that government was working on to stimulate growth, improve the overall fiscal position and address inefficiencies in SOEs.
They pointed at interventions which have been undertaken since previous IMF visit in May, which include the approval of the Integrated Resources Plan, simplified visa regime and the scrapping of a requirement for unabridged birth certificate for children entering the country. The cumbersome regulation was widely blamed for low tourist numbers to the country.
“Nevertheless, economic growth continues to deteriorate. The country’s largest economic risk is Eskom. Government has announced a comprehensive set of structural reforms to support the energy sector and more specifically, Eskom.”
The country’s weak economic position had seen some senior business leaders suggest that government may have to approach the IMF for assistance, but such a thought was dismissed by several top officials, including the Governor of the Reserve Bank Lesetja Kganyago.
Last week, ratings agency Standard and Poor’s changed its outlook on South Africa’s sovereign credit rating to negative, citing low GDP growth, rising fiscal deficits and a growing debt burden.
–– Fin24