South Africa’s cen­tral bank seeks po­lit­i­cal sta­bil­ity

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CB gover­nor says coun­try must sort out its po­lit­i­cal woes to kick­start re­forms and thereby un­lock eco­nomic growth

LON­DON: South Africa must sort out its po­lit­i­cal prob­lems in or­der to kick­start struc­tural re­forms and un­lock eco­nomic growth, cen­tral bank (CB) Gover­nor Le­setja Kganyago told Reuters.

Speak­ing on the side­lines of a con­fer­ence or­gan­ised in Lon­don by the Bank of Eng­land, Kganyago also said fi­nan­cial mar­ket in­fla­tion ex­pec­ta­tions seemed to be out of kil­ter with re­al­ity.

He added that he was happy with the South African Re­serve Bank’s in­de­pen­dence fol­low­ing a flurry of crit­i­cism ear­lier this year.

South Africa has fallen into re­ces­sion in a year that has also seen cor­rup­tion rows, in­fight­ing be­tween po­ten­tial suc­ces­sors to scan­dal-plagued Pres­i­dent Ja­cob Zuma and the row over cen­tral bank in­de­pen­dence.

Kganyago said that pol­i­tics re­mained the key to eco­nomic im­prove­ment, es­pe­cially as noise in­ten­si­fies in the run-up to the rul­ing African Na­tional Congress (ANC) party’s lead­er­ship con­test in De­cem­ber.

The ANC is riven by fight­ing be­tween fac­tions back­ing Deputy Pres­i­dent Cyril Ramaphosa and for­mer African Union head Nkosazana Dlamini-zuma as lead­er­ship can­di­dates.

“Pol­i­tics is at the heart; you can’t do struc­tural re­forms un­less there is po­lit­i­cal cer­tainty,” Kganyago said, adding this had im­pacted on con­sumer and busi­ness con­fi­dence, the lat­ter be­ing at its low­est since 2014.

“There needs to not only be clear com­mu­ni­ca­tion of what pol­icy is go­ing to be, but also im­ple­men­ta­tion that demon­strates where pol­icy is go­ing, that will take the un­cer­tainty away.”

South Africa is also strug­gling with high un­em­ploy­ment, weak in­fra­struc­ture and in­ef­fi­cient staterun firms. Its credit rat­ing was cut to junk ear­lier this year by two of the top three rat­ings agen­cies.

And while the world econ­omy is steadily re­cov­er­ing, South African growth re­mains anaemic - the cen­tral bank pre­dicts the econ­omy to ex­pand just 0.6 per cent this year.

In con­trast, the global econ­omy could grow 3.5 per cent in 2017, the In­ter­na­tional Mone­tary Fund fore­cast.

“We need to raise that po­ten­tial growth rate through struc­tural re­forms, which un­for­tu­nately are not in con­trol of the cen­tral bank,” said Kganyago, not­ing that po­ten­tial growth was now seen at 1.5 per cent com­pared to 4 per cent a few years ago.

“If you im­ple­ment struc­tural re­forms I can guar­an­tee growth will take off. We all know what the re­forms are they just need to be im­ple­mented.”

In­vestors in South Africa were spooked ear­lier this year by a pro­posal to switch the cen­tral bank’s man­date to pro-growth from in­fla­tion and cur­rency sta­bil­ity.

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