IMF urges SA to fight graft as post-1994 gains unwind

South African authorities should deepen the fight against corruption and change its labour and product markets as some of the nation’s post-apartheid achievements have “recently unwound” amid slow economic growth, the International Monetary Fund (IMF) said.

IMF directors recommended “the forceful application of the Public Financial Management Act to increase deterrence against corruption,” the Washington-based lender said in a statement Monday. They called for the completion of pro-investment, job-creating measures in the telecommunications and mining industries, and said more progress is needed to contain fiscal risks from debt-laden state-owned companies.

IMF officials issued the statement after so-called Article IV consultations with local authorities.

Africa’s most-industrialised economy hasn’t grown at more than 2% since 2013. Bailouts for troubled state companies such as Eskom and South African Airways have raised risks that the National Treasury will breach its spending limits. Probes by the anti-graft ombudsman indicated that billions of rand was looted from state companies by businessmen and officials with close ties to former President Jacob Zuma. They all deny wrongdoing.

Source: International Monetary Fund

Per-capita economic growth has turned negative, the jobless rate is near a 15-year high of 26.7%, and income inequality is among the highest globally, the IMF said. Business confidence has slipped every month since reaching a more than two-year high in January as industries await real reforms under the tenure of new President Cyril Ramaphosa.

Fiscal risks

“Significant vulnerabilities arise from fiscal risks related to weak and poorly managed state-owned enterprises,” the IMF said. The state’s guarantees of Eskom’s outstanding securities total about 7% of gross domestic product, Treasury data show.

The lender maintained its forecast for economic growth this year at 1.5% and left the 2019 estimate at 1.7%.

“External risks include large gross external financing needs, and a current-account deficit financed by flows that are prone to sudden reversals in response to abrupt changes in global financial conditions and sovereign credit ratings,” the IMF said.

Source: moneyweb.co.za