South Africa’s Central Bank Governor Lesetja Kganyago says the country’s weak growth mirrors the global economic outlook and that engagement with businesses and investors is continuing in an “Exclusive Insights” conversation with Bruce Whitfield and CEOs on Thursday.
“What is important for us is to sort out the investment environment in South Africa and the conversations with the business community, that say what is it that is hindering investment,” said South African Reserve Bank Governor Kganyago.
According to the central bank, the country’s economy is expected to grow only 0.8 percent in 2016, nowhere near the government’s target of 5 per cent.
“I think that you can say the same about the world economic outlook, we are very much part of the world and we are an economy which is integrated with the world – if the world doesn’t grow, it doesn’t matter how cheaply you are trying to sell stuff, if there is no global demand.”
“It is incorrect to say that growth is not something that we control, it might not be that it is in the control of the Reserve Bank or of the treasury and that’s coming from those [IMF Spring] meetings in Washington.”
Where he said the three pronged approach to the world economy was discussed, fiscal policy and monetary policy (which are in place in SA) and the third being structural reform, “the more important one” he said.
“That goes to the belly of microeconomic change, the environment of business and the cost of doing business.”
At the breakfast, the Chief Executive Officer of Barclays Africa, Maria Ramos shared her outlook saying there is more awareness now around the ratings downgrade than ever before and that we need to look act on structural reform.
“What is different for me, sitting in the private sector this time around there is so much awareness of how much we need to do together, this is not the first time that South Africa faces a ratings downgrade – it’s the first time it’s come this close to a real downgrade.”
But she remembers facing a ratings downgrade in the past and the lack of awareness and public discourse around the ratings downgrade.
“For the first time as a nation, we have ordinary people talking about the ratings downgrade and we have business engaging with it and I think that is important for us as a nation.”
She agrees that structural reform is important but that action is necessary.
“Structural reform takes huge amounts of action and sometimes very difficult, not just policy decision but action on those policy decisions.”
“If we don’t take those actions, we are going to find ourselves falling further and further behind as a nation in a highly competitive global environment and although the global economy is facing some real challenges, it will overcome these challenges and we cannot afford to fall behind,” Ramos said.
“Catching up is hard to do and I think that that’s really a challenge for us,” she added.
The Governor speaking on the road show that business, government and labour recently embarked on to improve investor confidence in the country said this had not happened before, where the minister of finance, business and trade unions go on a road show, and because of this he says this sends a crucial message to investors. “Here is a country that understands its problems and is prepared to confront its problems”
“Those engagements are continuing, and I think that what is important for us is to sort out the investment environment in South Africa and the conversations with the business community that say what is it that is hindering investment.”