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.