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IMF: SA needs a more decisive approach to turn its economy around

The IMF has now joined ratings agencies in expressing concern about the country's overall economic growth, citing immediate concerns.

file: The IMF said South Africa's economic growth looked set to remain sluggish next year.Picture: EWN.

JOHANNESBURG - The International Monetary Fund (IMF) on Monday said a more decisive approach to reform by government was urgently needed to turn around South Africa's ailing economy.

The IMF has now joined ratings agencies in expressing concern about the country's overall economic growth, citing immediate concerns.

On Friday night, S&P Global kept South Africa one notch below subinvestment grade and changed the country's outlook to negative.

The IMF said South Africa's economic growth looked set to remain sluggish next year.

“The IMF highlights that South Africa faces three main challenges, specifically weak economic growth, a deteriorating fiscal situation and difficulties in the operations of state-owned enterprises (SOEs).”

South African Reserve Bank governor Lesetja Kganyago predicted last week that the country would record growth of 1.4% next year.

He also revised this year's expected growth to 0.5%.

The IMF is concerned that growth is being affected by poorly performing state-owned enterprises, saying Eskom needed to immediately institute various measures.

These include speedily pursuing savings in coal procurement, employee attrition, aligning wages with productivity - and collecting arrears.

“The country’s largest economic risk is Eskom. Government has announced a comprehensive set of structural reforms to support the energy sector and more specifically, Eskom.”

The fund said that failure to enact such measure would erode financial stability and further raise the country risk premium.