Lesetja Kganyago, the governor of the South African Reserve Bank. File picture: Carlo Allegri/Reuters
Johannesburg – SA Reserve Bank Governor Lesetja Kganyago has contradicted President Jacob Zuma over the ANC leader’s projected economic growth of 2.9 percent for 2017.

Zuma said he was optimistic that this year's growth forecast of 2.9 percent would be achieved.

He made the remark during his keynote address at the ANC’s 105th anniversary celebrations in Joburg recently.

On Friday, Kganyago told a radio station that while this year would be better than 2016, 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 the sub-Saharan Africa, not for South Africa. Our projection of growth is still over one percent for this year," he said.

"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 economy is very good for the South African economy because that is a very important destination of our manufactured export,” Kganyago added.

Investec chief economist Brian Kantor said that 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,” Kantor said.

He 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 before 2016 was over.

This sent the South African government into a scramble as it held strategic meetings with the business sector and labour aimed to avoid a possible downgrade, which would have meant higher interest rates.

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

He said the ratings agencies were not the enemy, as they rated everyone in the world. However, here 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’s that’s not downgraded or upgraded if they are doing too well," Zuma said.

"It is their job but, of course, there was such focus on us here,” he added during an interview with three SABC radio stations.


Saturday Star