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Competitiveness-raising investments vital to breaking low-growth shackles

8th November 2013

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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The key to achieving sustained gross domestic product (GDP) growth of around 6%, as stated in the National Development Plan (NDP), is enhanced competitiveness, says First National Bank chief economist Sizwe Nxedlana.

He says this means that the country has to invest in infrastructure, adding that electricity supply and the logistics network are constraints to the South African economy.

South Africa also requires labour legislation that is conducive to productivity.

Nxedlana says there is also often a discon-nect between government regulations that exist on paper and the actual service businesses receive from government.

Regulations, such as mining legislation, also change continuously, creating uncertainty in the marketplace, he adds.

“There [are] political constraints to opti-mal economic policy,” notes Nxedlana, citing the “massive disagreement” between political stakeholders in South Africa on the path the country should follow.

This is not an economic problem, he says. South Africa has “holy cows we need to overcome politically” to reach a compromise and implement the NDP.

Nxedlana describes the South African eco-nomy as “mired in mediocrity”.

However, even if this means the country is perforing below its potential, “things could be worse”.

“It is not doom and gloom, [but] this average is frustrating because it is self-imposed.”

Nxedlana says FNB expects the below-potential growth in South Africa to continue to the end of next year, with 2015 not delivering more than 3% GDP growth.

This will be driven by a slowdown in domestic demand and less than meaningful recovery in the country’s exports, which has not yet rebounded, follow-ing the Marikana incident last year.

The private sector is also likely to pull back as confidence is low, partially owing to what it views as an uncertain political environment.

“The private sector is watching too much television,” Nxedlana quips.

Nxedlana expects inflation to average 5.8% in 2013 and 5.5% in 2014.

Interest rates are unlikely to increase until the first half of 2014.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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