The International Monetary Fund (IMF) has published its April World Economic Outlook for 2018, highlighting a change in fortunes for South Africa thanks to the recent changes in leadership.
In its report, the IMF raised its growth forecast for South Africa from 0.9% in 2018 and 2019, to 1.5% and 1.7%, respectively.
The change in fortunes for the country has been attributed to the election of president Cyril Ramaphosa to the top office, following the disastrous tenure of his predecessor, Jacob Zuma.
The IMF said that business confidence is likely to gradually firm up with the change in the political leadership, but warned that the country’s growth prospects remain weighed down by structural bottlenecks.
The medium-term outlook is subdued, it said, with growth expected to stabilise at 1.8% over 2020–23.
“In South Africa, the election of new political leadership reduces some of the policy uncertainty. However, advancement of the outstanding reforms is critical for reinvigorating economic growth and making it more inclusive.
“Improving infrastructure; reducing barriers to entry in key sectors, including transportation and telecommunications; improving the efficiency of government spending; and reducing policy uncertainty remain central to attracting private investment, raising productivity across the economy, and promoting job creation,” the group said.
Another point of concern raised was the proposal to introduce a national minimum wage. This policy has the potential to hurt firms’ competitiveness and employment prospects in the formal sector, the IMF warned – but it could improve working conditions and reduce poverty.
The group expects the unemployment situation in South Africa to reach new worst-ever levels, with the 2018 unemployment number expected to hit 27.9% in 2018, and climb to 28.3% in 2019.
“For a sustained rise in living standards and inclusiveness, however, broad-based efforts are needed to raise the quality of education and improve access to opportunities for all segments of society,” it said.
Despite the turnaround, the IMF data shows that South Africa is lagging behind its peers in sub-Saharan Africa, where middle-income countries are seeing growth rate projections between 4% and 7%.