We’re tackling structural weaknesses, says South Africa

2 Oct 13
South Africa’s government has stated that it is already addressing economic and administrative problems, highlighted by the International Monetary Fund in its latest assessment of the country’s economy.

By Vivienne Russell | 2 October 2013

South Africa’s government has stated that it is already addressing economic and administrative problems, highlighted by the International Monetary Fund in its latest assessment of the country’s economy.

The IMF Executive Board, in a report published yesterday, said the economic progress South Africa had made over the past two decades risked being undermined by structural weaknesses. These included poor public service delivery, which was affecting investor perceptions and macroeconomic outcomes.

‘In recent years, the country’s structural problems that are holding back growth and job creation have come to the fore,’ the IMF directors said.

‘The economy has underperformed other emerging markets and commodity exporters, exacerbating South Africa’s already high levels of unemployment (25%) and inequality, and contributing to rising social tensions.’

Other problems flagged up by the IMF included weak trading partner growth, declining competitiveness and counter-cyclical fiscal policy, which had all contributed to rising fiscal and current account deficits.

Growth projections were sluggish and unemployment expected to remain high. Although public investment had been robust, the effects were offset by weak consumption and ‘lacklustre’ private investment, the IMF said.

‘A gradual withdrawal of stimulus is projected to result in declining fiscal deficits, but continued high imports for infrastructure investment will likely keep the current account deficit close to 6% of gross domestic product throughout the projection period.

‘Quicker implementation of much-needed structural reforms could result in higher growth and job creation.’

But a statement from South Africa’s National Treasury said that, in August, the Cabinet had agreed to shift its focus towards the accelerated implementation of plans to stimulate economic growth and foster job creation.

‘One of these issues is the implementation of the National Development Plan which government believes will make a significant contribution to the longer term effort to address both historical and new challenges confronting the South African economy,’ the National Treasury said.

‘Responding to issues of domestic political economy, as well as the effort to improve performance in the public sector is an ongoing process requiring a wide range of measures and interventions. Actions are being taken to improve labour relations in key sectors and administrative structures and processes are being strengthened towards improved service delivery and public accountability.’

Areas of particular focus include: infrastructure investment; an improved regulatory environment; improved prospects for youth employment; and more intensive support for small businesses.

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