South Africa’s economic future looks promising, South African Reserve Bank (SARB) Governor Tito Mboweni said on Thursday.
Speaking at the Euromoney conference on South Africa Ten Years on: Empowerment, Finance, Trade and Investment in Cape Town on Thursday, he said: “The challenge is to further increase the growth performance of the domestic economy. The foundation has been provided over the past 10 years to make this achievable. So the future looks promising.”
He said the normalisation of relations with the rest of the world from 1994 onwards made it unnecessary to follow relatively restrictive fiscal and monetary policies to maintain a surplus on the current account of South Africa’s balance of payments, which had constrained economic growth in the apartheid years as the South African economy then could not access foreign capital markets.
He noted that access to international capital markets will allow the economy to run a current account deficit and thereby create leeway for the promotion of economic growth.
“In the past 10 years a deficit was therefore recorded on the current account, but this deficit as a ratio of gross domestic product remained low and averaged only 1% per year. Over the same period a net financial inflow was recorded from the rest of the world amounting to nearly R204-billion, compared with the net financial outflow of about R45-billion from 1985 to 1993. As a result, the level of foreign investment in South Africa amounted to R736-billion at the end of 2002,” Mboweni said.
The access to foreign capital and the ability to pursue more liberal policies while maintaining financial stability contributed materially to a better growth performance of the South African economy and the improvement in the living standards of the population.
South Africa’s real economic growth doubled from an average annual rate of 1,5% during the 1980s to about 3% between 1994 and 2003.
In addition, the average growth in real gross national income per capita, an indicator of living standards, improved from a negative figure of 1,1% per annum during the 1980s to a positive figure of 0,8% between 1994 and 2003.
The SARB in recent years has shifted its focus to reducing its oversold forward book and to strengthen gradually the official foreign exchange reserve position.
As a result of the appreciation in the exchange rate of the rand from December 2001 onwards, the oversold forward book of the SARB amounting to $4,1-billion at the end of July 2003 and was quickly turned around to an overbought position of $38-million at the end of February 2004.
The official foreign exchange reserves of the country was also increased from $7,6-billion at the end of December 2002 to $10-billion at the end of April 2004.
“It is now the objective of the Reserve Bank to increase its foreign reserves further in a gradual manner whenever the underlying circumstances allow it to do so,” Mboweni stated. — I-Net Bridge