IMF says South Africa's economic growth weakened by bailouts

South African economic growth has slowed over the last decade. Debt has climbed rapidly as the government scrambles to plug a widening budget deficit and bail out state firms plagued by mismanagement.

FILE: A man walks past the International Monetary Fund (IMF) headquarters in Washington DC on 5 September, 2018. Picture: AFP

JOHANNESBURG - South Africa’s economy is likely to grow by just 0.8% in 2020, the International Monetary Fund said on Thursday, because of the weak performance of state companies and the government bailouts that are widening an already large deficit.

South African economic growth has slowed over the last decade. Debt has climbed rapidly as the government scrambles to plug a widening budget deficit and bail out state firms plagued by mismanagement.

On Tuesday, a state-owned bank gave South African Airways (SAA) R3.5 billion ($244.20 million) to keep it going as it wraps up a voluntary restructuring. The state power company Eskom got a R230 billion bailout in 2019 as it struggled to service its R450 billion of debt.

“Weaknesses in public enterprises are resulting in poor service delivery and weighing on the fiscus through bailouts or administrative interventions,” the IMF said in a statement following a regular consultation this month.

Regular power cuts over the last 18 months saw the economy contract twice in two quarters last year. Communities where services like water and healthcare have failed have erupted in protests and riots.

A report last week by the country’s national science council showed blackouts by Eskom cost the economy up to R120 billion ($8.3 billion) in 2019.

“On current policies, staff projects a lacklustre growth recovery from an estimated 0.4% in 2019 to 0.8% in 2020 and 1.5% percent in the outer years,” the IMF said.