With a positive forecast for the South African economy this year predicted in different quarters, the South African Reserve Bank (Sarb) is being urged to put more money in consumers’ pockets to stimulate economic growth.
With unemployment rising and closing in on 50% among the youth, job creation should be the priority of the government of national unity in every department and every policy, political economy analyst Daniel Silke said.
He lambasted South Africa’s “very high interest rates” but said the series of repo rate cuts last year gave hope that the economy will perform well this year.
“We have very high interest rates in South Africa, to keep inflation at bay, which has been relatively successful, actually, from the Sarb perspective,” Silke said.
“It is now time for the Sarb to be a little bit more generous with the interest rate cycle. The economy could tick along this year. The limited momentum gained last year will at least be sustained and continue into this year,” he said.
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Unemployment remains a crisis
Independent political commentator Doctor Tshwale said the economy has to do better to improve job creation to give citizens the confidence that the government acts in their interest.
He said government needs to up the ante to deal with bureaucratic tardiness to unleash the potential of the economy.
“In the last quarter, 130 000 jobs were created mainly in construction. However, a sustainable push in agriculture, mining and manufacturing could bring more employment,” Tshwale said.
Silke argued SA’s macroeconomic figures show a modest strengthening.
The gross domestic product figures were “not great but certainly better” than in the past and there was substantial room for improvement.
“The bottom line is that the economy is moderately better than it was, but nowhere near what it should be. If the SA Reserve Bank is prepared to be just a little bit more accommodating when it comes to the interest rates, that could help the economy further,” Silke said.
The big problem for South Africans is that they haven’t had the disposable income – due to price increases for electricity and other utility charges – to be able to spend.
The improvement realised in the capital allocations for infrastructure spend in South Africa must see reciprocal relief for consumers to afford them some flexibility to spend, he said.
“So, limiting tax increases is critically important and lowering the interest rate is also important if the inflation rate allows that,” Silke said.
On unemployment, the analyst said the job market remained a critical problem due to the fact that South Africa was “just not able to sufficiently create enough new jobs.”
Though SA’s unemployment rate was statistically not much worse than it has been, it is nevertheless at a crisis level.
Joblessness affected everything – from social cohesion to the crime rate and the difficulty of making ends meet, which forces people to be reliant on state grants.
“[Unemployment] should be the absolute priority of the GNU in every department and in every policy. To stimulate employment means tax concessions for businesses and foreign businesses to stimulate investment in South Africa, proper export processing zones and policies to encourage investment from both domestic and foreign sources within South Africa,” Silke said.
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