JOHANNESBURG (Reuters) – The World bank forecast higher South African economic growth this year compared with the previous year, but warned of risks such as global trade tensions and poor balance sheets of state-owned companies.
The World Bank sees South Africa’s gross domestic product growing by 1.3 percent this year, an improvement from a forecast of 0.9 percent for 2018.
Economic growth would be supported by the implementation of structural reforms under President Cyril Ramaphosa such as relaxed visa regulations, the establishment of an infrastructure fund and progress on the Mining Charter, the bank said.
In its latest economic update report, the bank projected South Africa’s economic growth at 1.7 pct in 2020.
“We believe the reforms are going into the right direction but first they have to be implemented. Implementation is key,” Sebastien Dessus, the World Bank’s programme leader for South Africa told a news conference in Johannesburg.
The Bank, however, said South Africa faced risks such as El Nino weather conditions that could impact crop production, global trade tensions and the impact of cash-strapped state-owned enterprises like power utility Eskom on the national budget.
“An economy like the one in South Africa cannot afford to have Eskom as a failed entity. What government has to do is to work with the management and leadership of Eskom to figure out the way forward,” said Paul Noumba Um, the World Bank’s country director for South Africa.
“The way forward entails different kind of interventions. There is a debt restructuring dimension and at the same time the company itself has to become more efficient.”
Eskom is facing a severe financial crisis and Ramaphosa has appointed a team to, among other things, look into Eskom’s business and funding model and how the power utility should be structured.
Reporting by Oliva Kumwenda-Mtambo; Editing by James Macharia