- The IMF has recently released a report that showed South Africa's economy has grown even less than previously predicted
- The report showed that state-owned companies, especially Eskom has and will continue to put pressure on the economy
- The global lender also cited that amending the Constitution should be carefully considered and past global experience should be considered
A recently released report put forward by the International Monetary Fund (IMF) reveals South Africa's optimism in its economy is fading. The IMF went on to say that the current proposed economic recovery plans face serious restrictions, especially with the growing debt of state-owned companies.
In October 2018 the global lender saw Africa's most industrialised economy grow by 0.8%. This is lower than predicted in an earlier forecast which predicted 1.5%. South Africa's Treasury predicts growth of 0,7%.
"Some of the initial optimism has dissipated as growth remains stuck in low gear and reform implementation has faced constraints." the IMF said. It also named Eskom, state-owned power firm as one of the key risks.
However, there was a glimmer of hope as the International Monetary Funds named a few positive reforms," economic reforms in a number of areas, in particular, strengthening the finances of state-owned enterprises (SOEs), reducing the cost of doing business, and increasing competition are proceeding, albeit slowly."
"The recent investment conference between government and businesses ––domestic and international––on unlocking the vast investment opportunities is welcome."
The International Monetary Fund also warned that amendments to the Constitution should be carefully considered, especially those that would allow for land expropriation without compensation.
The report said the amendment to the Constitution allowing for expropriation without compensation should be considered carefully and be guided by international experience in similar situations.
A team from parliament has recommended the constitutional amendment that would make it possible for the state to expropriate land, it will now go to the national assembly for a vote.
“Land reform should focus on enhancing agricultural productivity and strengthening tenure security,” said the IMF.
The International Money Fund has also named labour concerns, ease of doing business, and the current condition of state-owned enterprises as risks that South Africa should swiftly address and resolve.