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S Africa must target 5pc growth

October 03, 2012

JOHANNESBURG, Oct 2: South African labour unrest will only temporarily deter investors, but the country must grow faster to avoid serious pitfalls ahead, the African Development Bank’s chief economist has told AFP.

Mthuli Ncube, who is also vice president of the multilateral bank, said Africa’s largest economy should be hitting levels of growth it has not seen in nearly half a decade.

“(The government should) come up with strategies that get South Africa to grow at five per cent and above, to me that is the issue,” Ncube said in an interview late on Monday.

“It’s achievable. And it is not just South Africa, it is the entire southern African region. It is achievable, but it does require focus.”

In the last quarter, South Africa’s growth reached 3.2 per cent, but it is forecast by the International Monetary Fund to ease back to 2.6 per cent for the entire year.

While better than many developed nations, that rate lags well behind South Africa’s emerging market peers and is unlikely to significantly alter official unemployment rates, which remain stubbornly high around 25 per cent.

Ncube said that South Africa, the continent’s top power, also needs like other African nations to better transform growth into jobs, particularly now when a large percentage of the population is of working age.

“What concerns me is the ability of this growth to create jobs, it is very important that the demographic dividend should be harnessed.”

Last year a panel set out a National Development Plan for the country, which aimed at eliminating poverty and overhauling education, infrastructure and the health system by 2030.

But so far the agenda has languished.

“The plan that came out is a good one, I think we should start from there and look at ways of implementing that,” said Ncube.

Concern that South Africa’s political elite is not coming to terms with the country’s problems recently resulted in Moody’s and other agencies downgrading the country’s credit rating.

However Ncube said he did not share the ratings agencies’ concerns about institutional stasis.

“I’m not concerned about the political state, South Africa has very strong democratic institutions, I don’t think there is that much to fear.”

“The downgrade in my view should be around economic growth, around how to deal with it to absorb the global shocks that are impacting South Africa.”

Looming large on the horizon are the risk of increased spillovers from Europe’s debt crisis, which has already hit South Africa’s tourism and other sectors. —AFP