The International Monetary Fund (IMF) said today that South Africa's new government should take advantage of its mandate to “implement bold reforms” and boost economic growth, which is expected to be just 1% this year.
"The new government should use the opportunity of a new term to implement bold reforms and address long-standing challenges and bring the economy to its full potential; this can kickstart the economy from a path of weak growth, high debt and deteriorating living standards towards high growth, fiscal sustainability and shared prosperity," the Fund said in its assessment of the financial adjustment programme.
The Fund believes that the country, the most industrialised in sub-Saharan Africa, has sufficient financial capacity to meet its financial commitments.
In the note, the IMF forecasts that the country's economy will grow by 1% this year, after having expanded by 0.7%, in a context of frequent widespread power outages and disruptions to ports and railways, and with the unemployment rate above 30%.
In the May elections, the African National Congress (ANC) lost its parliamentary majority and formed a government of national unity with the main opposition Democratic Alliance and nine other parties, taking the country into uncharted political territory, as the ANC has governed South Africa since the end of the segregationist period.
The government, the IMF writes, should implement “structural and fiscal reforms, complemented by prudent monetary and financial policy, broadening the current reform agenda to include greater ambition and accelerating implementation to put the economy on a permanently higher and more inclusive growth path.”
In addition to 1% growth this year, the IMF expects economic expansion to stabilize at around 1.4% in the medium term due to “only gradual improvement in structural constraints.”
