South African Reserve Bank (SARB) Governor Lesetja Kganyago addressed several critical economic issues facing South Africa when he addressed its 104th annual meeting held in Pretoria on Tuesday.
"The world economy is recovering from the Covid-19 pandemic, but risks remain, including high inflation and unprecedented levels of public debt."
Kganyago highlighted South Africa's economic slowdown, stating, "economic growth slowed to 0.7% in 2023 from 1.9% in 2022, mainly due to load shedding and logistical constraints."
Load shedding, the periodic power outages implemented to relieve the strain on the national grid, has been a significant hindrance to business operations and household productivity.
Additionally, logistical constraints, such as disruptions in the transport sector, have further compounded these issues.
Despite these challenges, he expressed cautious optimism, forecasting that “growth should improve to 1.1% in 2024 and 1.7% by 2026 as energy and logistics constraints ease”.
Inflation was another major concern, with Kganyago remarking that headline inflation has decreased from 6.9% in 2022 to an average of 6% in 2023.
The SARB projects inflation to ease to 4.9% in 2024 and stabilise at around 4.5% by 2025-2026. However, the country has experienced significant price hikes in essential goods and services, which have strained household budgets.
For example, the cost of basic food items and fuel has surged, making daily life more expensive for ordinary South Africans. To manage these inflationary pressures, the SARB has maintained the repurchase (repo) rate at 8.25% since May 2023.
Employment was another critical issue, with Kganyago noting, "by the first quarter of 2024, employment levels exceeded pre-pandemic levels, yet the unemployment rate remains high at 32.9%“.
During the Covid-19 pandemic, South Africa lost approximately 2.2 million jobs, a devastating blow to the labour market.
However, as the economy has started to recover, significant progress has been made, with over 2.5 million jobs created post-pandemic, although this has not been sufficient to keep pace with labour force growth.
He emphasised the need for economic reforms to create jobs and reduce unemployment.
Kganyago also addressed the financial stability of the economy in the face of global turbulence.
"The SARB is managing risks related to geopolitical tensions, persistent inflation, and high government debt levels."
Governor Kganyago addressed financial stability, noting efforts to enhance anti-money laundering measures to exit the FATF grey list.
"We have made significant progress in improving our anti-money laundering and counter-financing of terrorism framework. These efforts are critical for exiting the FATF grey list and restoring confidence in our financial system."
These initiatives include the establishment of the Corporation for Deposit Insurance (CODI) to protect depositors and the modernisation of payment systems to promote financial inclusion and economic development.
Overall, Kganyago's address underscored the SARB's commitment to navigating the economic challenges with a focus on stability and growth.
The speech emphasised the need for ongoing reforms and strategic initiatives to ensure a resilient economic future for South Africa.
IOL