Share

Sarb: SA's growth prospects dim

Cape Town  - Prospects for the economy to grow in the short term are not good as businesses hold back on big projects, an SA Reserve Bank (Sarb) economist said on Wednesday.

"It is clear that people will be reluctant to enter into bold ventures, big capital ventures and heavily geared undertakings," Johan van den Heever told parliament's standing committee on finance.

"It is not good news for short-term growth. One should recognise that," he said.

"That said, a consumer-led upswing in an environment of relatively low inflation and generally healthy policies which is not heavily credit dependent, is far more sustainable.

"One would expect that despite the external circumstances in Europe and (the United States), our domestic upswing will continue and will take us forward."

Van den Heever said South Africa has to "shape up" and lift its slow volume of exports.

"Exports are rising, but are not quite back to level we saw in 2008 and this has been a concern to economists," he said.

"It is one of the things the South African economy needs to shape up on."

Reasons for the weakness include poor transport infrastructure and the lack of availability of electricity.

Gold, which is being mined "deeper and deeper" with the grades becoming "lower and lower", is also having an impact on poor export volumes.

"Our ability to export and take advantage of high commodity prices has been ruined (because of) our transport infrastructure," he said.

"Our government is addressing some of these infrastructure bottlenecks, but to install a pipeline and expand a harbour takes a long time."

Exporters are less inclined to seek out new markets because of the strong value of the rand.

The Sarb has been increasing its holdings of foreign currency "quite a bit", but this has not been sufficient to lead to a depreciation of the currency.

"Part of the reason for that has been that our exports like gold and platinum have been very buoyant, which has supported our export proceeds and underpinned the exchange rate of the rand."

A stronger rand however, is "helpful from an inflation point of view".

Van den Heever said sustainable monetary and fiscal policies have allowed the inflation rate to decline quite a bit.

"Currently, inflation is at the mid-point of the range.

"If you took out the volatile components like food and energy you would find that inflation rate is on the tame side, which is good from an inflation monitoring point of view."

He said the Sarb has built up its foreign currency reserve position to around $50bn (about R356.8bn) which has created confidence in the economy.

"An American investor, when things are difficult, prefers to pull money into the US, where they know their government is overseeing the financial system.

"They would prefer to have their money under their own national control rather than another country's banking system."

Van der Heever said US investors took their money back to the US after the financial crisis in 2008, causing emerging markets to fall "a bit".

"To some extent, the same thing may happen. International investors become inward-looking and pull their money back into known. We see that from time to time. There is no reason to think these fluctuations will come to and end."

The rand was down more than 1% against the dollar on Wednesday, after spiking at a year low of R7.50/$ on Tuesday. The currency was trading at R7.13/$ early on Wednesday afternoon. 

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.83
+0.3%
Rand - Euro
20.36
+0.3%
Rand - Aus dollar
12.31
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders