South Africa\u2019s plan to revive an economy mired in the longest recession since 1992 will fail unless it deals with structural constraints such as power cuts, central bank Governor Lesetja Kganyago said.<\/p>\n
A recovery program agreed on earlier this month is banking on the rejuvenation of the energy-intensive mining industry to help counter the devastation wrought on South Africa\u2019s economy by the coronavirus and a lockdown that was imposed to curb its spread.<\/p>\n
After the economy shrank the most on record in the second quarter, the country was hit by a new wave of electricity outages, known locally as load shedding, in July.<\/p>\n
\u201cWe experienced electricity load shedding in an economy\u201d that was just starting to open from the virus lockdown, Kganyago said Wednesday in an interview with Johannesburg-based radio station Power FM. \u201cWith these structural constraints you can provide all the stimulus you want, but it\u2019s not going to grow the economy.\u201d<\/p>\n
Kganyago said he has not seen the recovery plan and that it needs to be credible and implementable. President Cyril Ramaphosa has said he\u2019ll release the plan once the cabinet has signed off on it.<\/p>\n
Unchanged rate<\/strong><\/p>\n Kganyago\u2019s comments come almost two weeks after the monetary policy committee left its benchmark interest rate unchanged at 3.5%, the lowest level since it was introduced in 1998.<\/p>\n While the central bank has been criticized by politicians and labour unions that say it should be doing more to support the economy, it has cut the key rate by 300 basis points this year. That\u2019s among the biggest downward moves by global central banks, according to data compiled by Bloomberg.<\/p>\n The lockdown to curb the spread of the coronavirus pandemic that\u2019s been in place for six months and shuttered most activity in April and May will contribute to an 8.2% contraction in gross domestic product, according to central bank forecasts.<\/p>\n Even with a rebound expected in the third quarter, it will take \u201croughly\u00a0up to\u00a02023 to get back to where the economy was in 2017,\u201d Kganyago said. \u201cEven before Covid, this economy had significant structural constraints that we had to deal with as a country.\u201d<\/p>\n
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