World Bank calls for growth-enhancing policies to re-align SA economy
The World Bank has urged South Africa to implement growth-enhancing policy interventions as the country’s recovery from the Covid-19 impact would be way less than that of its peers.
In an exclusive webinar with the Inclusive Society Institute (ISI), the lender said South Africa needed “to avoid another lost decade” of economic growth.
World Bank lead economist for Southern Africa Wolfgang Fengler said South Africa was among a few economies that had not achieved much in terms of economic prosperity.
Fengler said South Africa’s gross domestic product (GDP) per capita had stagnated since 2010 while its peers accelerated and doubled their GDP per capita during the same period.
“We have seen a scenario of where South Africa would be if it had continued to grow last decade as it did in the 2000s and what this trajectory would look like now,” Fengler said. “South Africa would be in the range of R65 000($4579.72) in terms of GDP per capita.
“Let us hope that at least with the next decade you get to that level and not the level it is currently at now, which is roughly a GDP per capita of above R50 000($3522.86), which is where it was in 2006.”
Yesterday, the IMF said that sub-Saharan Africa was set to record the slowest economic growth of any world region this year as the continent struggles to bounce back from a pandemic-triggered downturn.
The IMF said the region would reach 3.4% growth this year, well below a global forecast of 5.5%.
IMF head of Africa Abebe Aemro Selassie said the area had fallen behind much of the rest of the world in vaccinating its population as countries with the means to reserve shots had cornered supplies.
Selassie said South Africa, the region’s most developed economy, would grow by 3.1% following a 7% contraction last year. He said oil producers Angola and Nigeria would grow by 0.4% and 2.5% respectively.
South Africa recorded 2.2 million job losses in mid-2020 and less than 40% of these had been recovered by the end of the year.
Fengler said the country needed a suggested package of policy interventions “shifting from relief to recovery”.
“In terms of recovery, South Africa is experiencing a weak V-shape as up to almost half of the jobs lost have been recovered, but it is still below where it was prior to Covid-19,” Fengler said.
“Going forward, policy focus should be on the short-term needs to recover the 1.4 million jobs lost in 2020, and medium-term goals to improve the labour markets performance.”
ISI Chief Executive Daryl Swanepoel said South Africa needed at least 4 to 5% economic growth to start chipping away at the current high levels of 32.5% unemployment.
Swanepoel said a stable supply of electricity was at the centre of achieving those levels of economic growth.
“The country needs far more than the current supply capacity of electricity. If even this cannot be maintained, such growth will remain an illusion,” Swanepoel said. “New investment into manufacturing, for example, is dependent on the reliable and sustainable supply of electricity. “This is being undermined by Eskom’s seeming inability to find a short- to medium-term solution to the problem.”
World Bank country Director Marie Francoise Marie-Nelly said the bank had held meetings with finance minister Tito Mboweni about the country’s policy framework two weeks ago. - additional reporting by Reuters.