Gvt responds to IMF's growth outlook downgrade

JULY 8, 2016

Responding to the International Monetary Fund (IMF) decision to downgrade its growth outlook for South Africa to 0.1% for 2016 on Thursday, lower than National Treasury’s 0.9% forecast, the department said its forecast for the economy is more positive.

"In the immediate term, we expect growth and employment to be supported by several structural reforms and targeted government interventions as guided by the National Development Plan and the Nine-point plan. Furthermore, collaborative efforts by government and private sector aimed at coinvestments in infrastructure, supporting Small, Medium and Micro-sized Enterprises (SMMEs) and finding sector specific interventions are expected to further improve growth prospects," the Treasury said.

"We recognise, as articulated in the IMF report, that a comprehensive package of structural reforms is necessary to increase growth, create jobs and lower income inequality. An IMF/G20 guiding framework for structural reforms recommends that emerging market economies should focus on fiscal reforms, business regulations, labour market, infrastructure, banking/capital markets and product market regulations."

It said that South Africa’s structural reforms implementation package is anchored by the Nine-Point Plan, which
entails:

  • Resolving the energy challenge, 
  • Revitalising agriculture and the agro-processing value chain, 
  • Advancing beneficiation or adding value to minerals, 
  • More effecting implementation of a higher impact industrial action plan, 
  • Encouraging private-sector investment, 
  • Moderating workplace conflict (labour), 
  • Unlocking potential for SMMEs, cooperatives, townships and rural enterprises, 
  • State reform and boosting the role of state-owned companies: broadband rollout, water, sanitation and transport infrastructure.
  • Growing the oceans economy.

It further said that the country's economic growth scenario is anchored by progress demonstrated in various areas of South Africa’s Nine-Point Plan reform package; 

  • The Department of Public Enterprises and the Department of Energy are not only resolving, what was an energy crisis, but have made South Africa a global leader in renewable energy in partnership with the private sector. The energy department will soon unveil the first coal Independent Power Producers (IPPs) and further pursue IPPs for gas.
  • The Deputy President is leading government, labour and business at Nedlac on discussions on various labour reforms including introduction of secret ballots, codes of good practice and national minimum wage.
  • The Department of Agriculture has begun development of agriparks.
  • The Deputy President is leading the work on SOEs reforms. The Inter-Ministerial Committee IMC, under his leadership, is progressing in the development of a framework for private sector participation in SOEs and principles of disposal of non-strategic assets.
  • The Department of Trade and Industry has broadened its efforts to support and grow the local manufacturing base. The recent announcements of expansions by Toyota, building on investments by BMW, Mercedes-Benz, Ford and other manufacturers.
  • Under the leadership of the Minister of Environmental Affairs, great initiatives are in progress in growing the oceans economy and expanding employment associated with environmental sustainability.

"A detailed update on progress can be found on the following website www.gov.za," the department said.

"These programs are further supported by government collaboration with the private sector through various work-streams to boost economic growth. These interactions are already bearing fruit, for example the creation of a SMMEs venture fund, which provides start-ups with access to funding as well as mentoring by seasoned business leaders. The fund has already raised contributions in excess of R1.5 billion. The work-streams are in the process of canvassing recommendations on sector interventions with various departments.

"In the longer-term, South Africa will benefit further from a solid foundation of a strong institutional framework which promotes accountability and transparency as well as prudent fiscal and monetary policies.

As a country, we will use these positive developments and the contributions of partners such as the IMF to work even harder together to move South Africa forward."

A copy of the full Staff Report can be downloaded from the International Monetary Fund website www.imf.org or the National Treasury website www.treasury.gov.za.