The International Monetary Fund (IMF) and S&P Global Ratings have called on South Africa to enact urgent economic reforms due to the country’s weak economic growth, deteriorating debt situation and major headwinds for state-owned enterprises.
According to CNBC, South Africa economic growth is set to remain below population growth for the sixth consecutive year in 2020. This prediction was made by observing both the low per capita GDP (gross domestic product) growth and low job creation.
Despite South Africa’s “undeniable economic potential”, the country faces many obstacles.
The first obstacle faced by South Africa is the persistently weak economic growth. The “regulatory constraints, labor market rigidities and inefficient infrastructure” create a weak business climate.
The second obstacle is the country rapidly deteriorating fiscal and government debt situation. The S&P reported that “Unless the government takes measures to control the fiscal deficit and we see sustained reform momentum, we view debt as unlikely to stabilize within our three-year forecast period,”
A third major issue facing the country is the inefficient operations of state-owned enterprises (SOEs), in particular government utility Eskom. Coronel’s report said: “Inefficiencies in SOEs operating in network industries such as electricity and transport, translate into costly inputs for businesses, and repeatedly require financial support from the fiscus,”