IMF issues warning on SA economy

The IMF says South Africa’s economic growth is projected to increase to 1% this year and just 1.2% in 2018.

FILE: President Jacob Zuma and Deputy President Cyril Ramaphosa in discussion at the ANC national policy conference at Nasrec on 30 June 2017. Picture: Thomas Holder/EWN

JOHANNESBURG - The International Monetary Fund (IMF) has warned South Africa's vulnerabilities have become more pronounced and could increase unless economic growth is revived.

The IMF says South Africa’s economic growth is projected to increase to 1% this year and just 1.2% in 2018.

The fund is also warning that the scope for monetary or fiscal policy to provide stimulus is limited.

On Wednesday, the African National Congress (ANC) failed to agree a clear plan to get the economy out of recession and tackle near 28% unemployment but risked rattling investors with pledges on nationalising the central bank and expropriating land.

Backroom infighting blighted the ANC conference, held every five years, as factions rallied behind the candidate they hope will replace President Jacob Zuma as party leader in December, sources said.

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One section of the party is supporting Deputy President Cyril Ramaphosa, while another backs Nkosazana Dlamini-Zuma, former African Union chair.

Dlamini-Zuma's supporters, who include Zuma, want the ANC to implement radical policies to redistribute wealth to address the gaping inequality that exists between black and white South Africans 23 years after the end of apartheid.

Ramaphosa's backers also want to reduce inequality but by growing the economy, reducing unemployment and rooting out the corruption that has plagued the ANC under Zuma. They fear Dlamini-Zuma will continue in the mould of her ex-husband.

On Monday, Dlamini-Zuma's supporters called for ANC lawmaker Derek Hanekom to be thrown out of a meeting of the party's economic committee after he dismissed their proposal to change the Constitution to allow land expropriation without compensation, two ANC sources said.

Hanekom has been a critic of Zuma and corruption in the ANC.

The ANC officially agreed to accelerate land reform, with the possibility of expropriation without compensation as a last resort, without giving any details on how they would navigate the Constitution to do this.

The party also said it would like the central bank to be wholly state-owned, which initially spooked investors as the rand extended its losses against the dollar.

The currency later recovered when the central bank said it wouldn't make any difference because the Constitution protected its mandate whoever the shareholders were. The rand was still down 1.46% on the day.

Most central banks are state-owned and the ANC made a resolution that its central bank must be independent.

Talk about state-ownership, however, worries investors given the far-left of the ANC, who largely support the Zuma faction, have called for the nationalisation of mines and banks.

It also followed a damaging row about whether the central bank's mandate should be changed by the government.

Additional reporting by Reuters.

(Edited by Shimoney Regter)