Johannesburg - Corruption in South Africa was hampering reforms needed to boost economic growth and greater transparency was needed at state-owned companies, an official of the International Monetary Fund (IMF) said yesterday.
David Lipton, the first deputy managing director, said cutting taxes and increasing government spending would not solve the problem of sluggish growth in Africa’s most sophisticated economy.
The IMF last week cut its economic growth projection for South Africa - now the continent’s third-largest economy - to 0.1 percent from 0.6 percent, fresh evidence of the economic turmoil that the country faces. Lipton said this was not enough growth to raise per capita income, given the annual population increase of 1.7 percent.
“The present trajectory is simply not good enough. What is needed are fresh and new energetic South African policies - followed by action. The litmus test must be that the policy response fosters fundamental change that opens doors for the young people who will be the workers, entrepreneurs and innovators of the next generation; those who can power the economy upwards.”
Lipton said what economists called external shocks were part of South Africa’s weak growth problem.
“Most importantly, the rebalancing of the Chinese economy is reducing demand for exports throughout the world and contributing to the steep fall in commodity prices. This includes South African exports - iron ore, coal and platinum. The fact is that China’s growth now matters more to South Africa than growth in the UK and US.”
Upheavals
President Jacob Zuma’s unexplained decision to change finance ministers twice in four days in December and a series of political upheavals that followed had also hurt the economy’s prospects, Lipton said.
“The leadership changes at the National Treasury last December and other political developments have had an adverse impact,” he told a public lecture in Johannesburg.
“They have heightened concerns about governance, deepened political uncertainty and shaken investor confidence.”
Lipton also alluded to investors’ lack of faith in the management of the 300-odd state-owned enterprises, many of which were over-staffed and underproductive.
A team commissioned by Zuma to review the firms has recommended that some should be sold, but nothing has happened. “Support for money-losing companies is a growing drain on government coffers,” Lipton said.
As a solution, he suggested South Africa centralise the formulation of fiscal policy, reduce labour regulation uncertainty and root out public sector corruption.
But cutting taxes and increasing government spending would not solve the problem of sluggish growth in Africa’s most sophisticated economy, Lipton concluded.
Cutting its world economic outlook forecasts for the fifth time in 15 months yesterday, the IMF said it now expected global gross domestic product to grow at 3.1 percent in 2016 and at 3.4 percent in 2017 - down 0.1 percentage point for each year from estimates issued in April.
* With additional reporting by Reuters
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