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The International Monetary Fund’s (IMF) senior resident representative in South Africa Montfort Mlachila has confirmed that South Africa has not requested an IMF loan and he added that, “We will not see a balance of payments (support programme) for South Africa.”
Monfort was speaking at a Bureau for Economic Research programme in Johannesburg on Thursday. “We much prefer countries to resolve their own problems. I have no doubt SA has the ability to address its own problems on the growth front and the fiscal front.”
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But Mlachila also said many microeconomic reforms are needed to grow the country which was growing far more slowly than its emerging market peers.
“Due to state capture, a lot of public investment was wasted or ineffective,” said Mlachila who used various slides showing data that revealed South Africa’s “decline in growth is dramatic for a country not facing civil war”.
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“The economy over the past decade has been misallocating resources. In terms of export performance, South Africa has had a lacklustre performance,” he said showing how leading emerging markets performed much more strongly.
He said the most binding restraints on growth were in the micro-economy rather than in macro-economic policy.
“One of the restraints is wage bargaining processes which is imposed on smaller companies,” he said referring to how centralised bargaining wage agreements are extended to small and medium-sized companies.
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Mlachila added that, “You tend to see fairly large increases in wage compensation relative to productivity gains. Compensation has been above productivity gains. At the same time, SA’s global competitiveness has been declining over time and (in the) World Bank’s Doing Business Indicators.
“Growth can be improved by undertaking reforms. The greatest payoff would come from labour market reforms,” he said. Outlining what he thought would stimulate growth, he counselled South Africa to “avoid self-inflicted injuries” and to undertake “readily achievable policies to boost confidence” like broadband allocation and the simplification of visa rules, both for tourists and for investors.
Mlachila also said that IMF studies showed that South Africa’s growth trajectory would improve by making the SOE sector leaner and more efficient.
He did not speak about Eskom and the utility’s debt drag on the fiscus.