Loadshedding, grey listing hampering SA economic growth, says Kganyago
Governor of the South African Reserve Bank, Lesetja Kganyago says the country's ongoing energy crisis and the recent grey listing by the Financial Action Task Force has kept investors wary of bringing their money into the country.
This has worsened the country's already struggling economy and hampering further growth.
Kganyago delivered a public lecture at the University of Johannesburg on Wednesday, focusing on how inflation growth and the monetary policy outlook has impacted the local economy.
Although he acknowledged that the global economic growth has been slow post the Covid-19 pandemic, Kganyago says continuous blackouts have worsened the local consumer price index.
He warned that loadshedding is now expected to add 0.5 percentage points to headline inflation in 2023 and also reduce GDP growth by 2% this year.
Since November 2021, the Reserve Bank has raised the repo rate by a cumulative 425 basis points in an attempt to curb inflation.
Kganyago says although a reduction in the supply chain and deliveries have contributed favourably to the inflation dynamics of some countries, this has not yet had a material impact on local inflation.
"In fact, it is expected that our own domestic infrastructural bottlenecks will continue to exert upside pressure on the inflation outlook.
"In addition to the initial studies on the impact of loadshedding on growth, there is recognition and growing evidence that the country’s ongoing energy supply challenges are impacting prices as well," he adds.
Kganyago says another factor that has impacted inflation in South Africa has been the exchange rate weakness.
"The Rand has been one of the worst performing emerging market currencies this year and over the past 12 months.
"The rand has depreciated around 6.8% in the year to date and by 17.6% over the past year against the US dollar."
The governor says he hopes the government will remain committed to implementing structural reform measures, especially regarding logistics and electricity.
"We believe that the implementation of much-needed structural reforms will unlock South Africa’s growth potential and, in turn, address the long-standing unemployment challenges of the country."
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