Reserve Bank Governor Lesetja Kganyago has said that South Africa could avoid reaching out to the International Monetary Fund for funding if hard decisions are made.
Some economists have argued that the government could find itself approaching the IMF for funding to help prop up SA’s ailing economy, which is buckling under the weight of prolonged poor growth, high unemployment and struggling state-owned entities.
“We don’t have to get there. These problems are within our grasp, we know exactly what must be done. We know the trade-offs that must be made, we must make those trade-offs,” Kganyago said during a dialogue with journalists on Thursday.
He added the government would need to to take bitter medicine in order to prevent matters from spiralling out of control.
SA’s struggling economy has been hit by several shocks, including multi billion-rand financial support packages extended by National Treasury to keep loss-making state-owned entities afloat, record high unemployment and low growth.
Last month, state power utility Eskom said its total debt exceeds R440bn as it announced a net loss of R20.7bn for the 2019 financial year. The company’s precarious debt position has been flagged by global ratings agencies as having a negative impact on the economy.
Official statistics show that South Africa’s GDP shrank by 3.2% in the first three months of the year, the biggest contraction in 10 years. The country will enter its second recession in two years if the economy contracts again in the next quarter.
Unemployment also shot up to 29 % in the second quarter of the year, piling more urgency on President Cyril Ramaphosa’s plan to deliver on his mandate of creating jobs.