Sub-Sa­ha­ran Africa needs a pol­icy reset

A pol­icy reset is the only way to get back onto the high growth path. This means labour mar­ket flex­i­bil­ity, pol­icy cer­tainty, and di­ver­si­fy­ing away from com­modi­ties, ac­cord­ing to the International Mone­tary Fund.

Finweek English Edition - - THE WEEK -

weak­com­mod­ity prices and slow­ing eco­nomic growth have in­ter­rupted sub-Sa­ha­ran Africa’s blis­ter­ing 5.8% av­er­age growth over the last decade for the 20 fastest-grow­ing coun­tries. For this kind of growth to re­sume, Africa needs a pol­icy reset, says Axel Schim­melpfen­nig, the International Mone­tary Fund’s (IMF’s) se­nior res­i­dent rep­re­sen­ta­tive in South Africa, ref­er­enc­ing the IMF’s April 2016 Re­gional Eco­nomic Out­look for Sub-Sa­ha­ran Africa.

Speak­ing to fin­week, Schim­melpfen­nig said the con­ti­nent needs to counter over­re­liance on com­mod­ity ex­ports by di­ver­si­fy­ing into man­u­fac­tur­ing and ser­vices, while fo­cus­ing on fis­cal sus­tain­abil­ity, in­fra­struc­ture de­vel­op­ment and so­cial spend­ing. “We feel the lat­est Bud­get in SA sets ap­pro­pri­ate fis­cal tar­gets to safe­guard fis­cal sus­tain­abil­ity. The big ques­tion is whether the gov­ern­ment’s growth pro­jec­tions will be re­alised, and what it plans to do if growth falls short of its tar­get.”

Trea­sury ex­pects growth to limp along at 0.9% this year (Stan­dard & Poor’s [S&P] is fore­cast­ing only 0.6%), reach­ing 1.7% next year. This leaves lit­tle el­bow room for fis­cal ma­noeu­vring.

Schim­melpfen­nig says pro-growth re­forms would in­clude mea­sures to en­hance com­pe­ti­tion in the econ­omy, a more flex­i­ble labour mar­ket, in­creased in­fra­struc­ture in­vest­ment to re­duce the elec­tric­ity and other bot­tle­necks, and greater pol­icy cer­tainty. “The one thing we have seen in SA is the de­cline in the min­ing sec­tor, which has been im­pacted by lower com­mod­ity prices. How­ever, with a pre­dictable and con­ducive pol­icy en­vi­ron­ment, the min­ing sec­tor should sta­bilise.”

S&P high­lighted a num­ber of struc­tural is­sues that should be ad­dressed to put the South African econ­omy on a “firmer foot­ing” and to main­tain the coun­try’s in­vest­ment-grade rat­ing. Th­ese is­sues in­clude the pro­vi­sion of a re­li­able en­ergy sup­ply, where Eskom has been mak­ing progress through a bet­ter main­te­nance pro­gramme, ad­di­tional ca­pac­ity com­ing on­line (in­clud­ing from in­de­pen­dent power pro­duc­ers), and bet­ter man­age­ment of de­mand in peak pe­ri­ods, S&P said. Labour re­form is also needed to pre­vent pro­longed strikes and ad­dress high youth un­em­ploy­ment, which pose struc­tural weak­nesses to SA’s econ­omy, the rat­ings agency said.

From a pol­icy cer­tainty per­spec­tive, con­cerns in­clude the dis­cus­sions around the new Min­ing Char­ter, as well as the “co­he­sion of the ex­ec­u­tive branch”, with po­lit­i­cal ten­sion hav­ing in­creased since Nh­lanhla Nene was fired as fi­nance min­is­ter in December. S&P said the suc­cess­ful con­clu­sion of the Min­ing Char­ter talks “could help im­prove con­fi­dence and in­vest­ment”, while

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.