”A highly successful year” was how South African Reserve Bank Governor Tito Mboweni described 2003/04 in his annual economic report in Pretoria on Tuesday.
”Of particular significance was the attainment of the inflation target which allowed for a reduction in nominal money market interest rates. It is of utmost importance that the current, relatively low rates of inflation, be maintained in the coming years so that inflation expectations become a minor factor in the planning of businesses and households,” he said.
He said that if this could be achieved, there could be relative price stability, that ”high employment-creating growth” could only be achieved if price stability led to higher domestic saving and investment and became a major factor in the decisions of foreign investors to establish new enterprises in South Africa.
According to the annual economic report, employment remained ”at undesirably high levels” throughout the past decade.
Findings from the most recent household-based labour force survey by Stats SA indicated that 28,2% of the economically active population was unemployed in September 2003.
When those who had given up actively seeking work were also included, the unemployment rate rose to about 42%.
The report listed the low productivity and high cost of labour as a factor aggravating unemployment, but noted that the average level of wage settlements in collective bargaining agreements had fallen to 7,3% in the first half of 2004.
”It is predicted that the average settlement rate in 2004 will be between 7,5 and 8,5%,” the report said, noting this was down from 1995 level of 11,5% but up from 2000 and 2001 level of 7,4%.
The Reserve Bank again highlighted that the South African economy had been in an upward phase of the business cycle since the fourth quarter of 1999.
”This is the longest recorded period of economic expansion in the history of the country,” said Mboweni.
However, in 2003 growth in domestic production had slowed, reflecting a period of hesitant growth in the world economy and a recovery in the exchange rate of the rand following its earlier fall.
”Both these factors led to a horizontal movement in the volume of merchandise exports, while a larger proportion of domestic demand was satisfied by means of increased imports,” he said. – Sapa