South Africa revises growth potential

South Africa's economy can sustain a higher pace of growth thanks to structural reforms during the past few years, says Treasury director-general Lesetja Kganyago.

"The potential growth [rate] of the economy is now higher than what it used to be ... We are not experiencing the kind of boom and bust we used to experience before when it went above 3 per cent," he said.

Kganyago declined to say what he thought the potential growth rate for the continent's biggest economy had become, but noted that there was no big inflation pressure apart from global oil prices.

He was speaking after official figures showed that South Africa's gross domestic product grew 5.6 per cent in the third quarter, its fastest in more than eight years.

The data, which included revisions dating back several years, showed the average annual growth rate between 1996 and 2003 had risen to 2.9 per cent, from 2.7 per cent previously.

"South Africa is starting to reflect its own internal growth dynamics - in spite of concerns about a rand which has been strong in the past two years, the economy has been growing robustly," he said.

"The figures also show the economy is coping."

The rand has appreciated by more than 80 per cent against the weakening greenback since December 2001, hitting a six-year peak of 5.75 to the dollar.

Its gains have eroded domestic exports, taking a toll on corporate profits and sparking calls for intervention to weaken the rand - which the Government and central bank have repeatedly ruled out.

 

Kganyago said private fixed investment was picking up and plans for more spending on infrastructure by state-owned entities would also contribute to the potential growth rate.

Statistics South Africa has lifted its growth estimate for last year to 2.8 per cent from 1.9 per cent previously. Kganyago said the Government would also revise its growth forecasts at its next Budget in February, but declined to give estimates.

He also noted that the economy was finally starting to create jobs, which was good news for a country with an unemployment rate of nearly 30 per cent.

- REUTERS