Despite a gloomy and dark economic picture painted by South Africa’s Finance Minister Malusi Gigaba during his maiden Medium Term Budget Policy Statement of the country, it still has potential.
This was the impression painted by South African Reserve Bank Governor Lesetja Kganyago speaking to CNBC’s Geoff Cutmore in early October on the side-lines of the International Monetary Fund meetings in Washington. The interview will be broadcast on CNBC Africa in association with Brand South Africa on Monday the 30th October at 9pm CAT with a repeat on Thursday 2nd November at 7pm CAT.
Kganyago told CNBC that despite the weak growth forecast of 0.7 per cent for South Africa this year “growth is not where we would like it to be”.
He warned that politics could derail growth but “South Africa still has a lot of catch-up to do”, on several fronts.
Elaborating he said, for the first time in a long time the country underperformed “global economic growth recovery and so that already tells you we have a lot of scope to grow. Secondly the global recovery is actually broad based across regions and more important for us – as South Africa – is that the Euro area growth is expected to pick up.
“The Euro area is a very important trading partner for South Africa; it is an important destination for manufactured products, so we are hooked into the global value chain where we actually export to Europe. Thirdly South Africa’s economy has undergone some significant adjustments… it is only four, five years ago that South Africa was characterised as one of the fragile five, a lot has changed since then – we have had fiscal consolidation being set on path, we have had an adjustment on the current account side, we have had eight consecutive months of trade surpluses. South Africa is now running a positive net international investment position, which then tells you that when there is going to be monetary policy normalisation, South Africa has got its defences in place and we should be able to weather that storm quite easily and that tells you that growth will be sustained”.
Asked about his feelings on South Africa being moved down 14 places on the World Economic Forum Global Competitiveness Report and what the country could offer overseas investors who see a nation ravaged by legal malaise in the mining sector, political infighting and the ANC gripped by its own internal leadership battles rather than worrying about stability for the economy, Kganyago said these contestations take place in the best of democracies.
What he did find concerning, however is that the contestation is causing policy uncertainty because “you are trying to figure out who is going to adopt which policy and that does not bode well for investor confidence”.
“But”, he said, “we will get this behind us, as we have been there before.”
On issues raised about cronyism and corruption, Kganyago reckons that the fact that these things are actually coming out, the fact that South Africans are talking about these things is testimony to the strength of its institutions. “The institutions of our democracy are working,” he said.
Kganyago also shares his insights on Bell Pottinger, the Guptas, the KPMG saga, inflation expectations, the rand and why Nigeria’s growth is good for South Africa. For more insights watch the interview brought to you in association with Brand South Africa on Monday the 30th October 2017 at 9pm CAT with a repeat on Thursday 2nd November at 7pm CAT.