Bank boss disputes Zuma claim

2.9% growth rate not realistic

SOUTH African Reserve Bank governor Lesetja Kganyago has contradicted President Jacob Zuma over the ANC leader’s projected economic growth of 2.9 percent for this year.

The president had said he was optimistic the 2017 growth forecast of 2.9 percent would be achieved. He made the remark during his keynote address at the ANC’s 105th birthday celebrations in Johannesburg this week.

Kganyago told a radio station yesterday that while this year would be better than last, where the economy’s projected growth was 0.5 percent, “we are not out of the woods yet”.

“I don’t know about the 2.9 percent. The 2.9 percent is the projected growth for sub-Saharan Africa, not for South Africa. Our projection of growth is still over one percent for this year. We do not doubt that 2017 will be better than 2016. Part of it is that the global environment that includes the global economy is expected to grow faster than it had grown last year… the European (economy) is also starting to pick up.

“A strong European one is very good for the South African economy because that is a very important destination of our manufactured export,” said Kganyago.

Investec chief economist Brian Kantor said economic growth, by and large, depended on what the Reserve Bank did with interest rates.

He said it was possible for the economy to get out of the woods if the rates were slashed. “Without a cut in interest rates we won’t see a two percent growth. The Reserve Bank should be challenged on its interest rates settings,” he said.

Kantor added that to encourage more household spending, which accounted for 60 percent of the economy, mortgages, among other rates, needed to be cut as that would lead to improved economic growth.

There were fears last year that the country’s sovereign credit rating could be downgraded to junk status.

The government held strategic meetings with the business sector and labour aimed at avoiding a downgrade, which would have meant higher interest rates.

On Thursday, President Jacob Zuma applauded the government, business and labour for speaking with one voice in motivating against a credit downgrade, which would have resulted in higher interest rates.

Zuma said the ratings agencies were not the enemy because they rated everyone in the world. However, in South Africa people seemed to know little about them, hence they were a little “apprehensive” at first.

“We are not regarding them as the enemy; this is the job they do. We regard them as instruments that are used everywhere, there’s no country that’s not downgraded or upgraded if they are doing too well. It is their job, but of course, there was such focus on us here,” the president said during an interview with three SABC radio stations.