IMF+wants+SA+labour+laws+changed,+BDay+05-06-13

Business Day, 13 June 2005
=IMF urges labour reform for growth=


 * Lucia Mutikani, Reuters**

SA’s economy could achieve a 6% growth rate, provided the country implemented further structural reforms, the International Monetary Fund (IMF) said at the weekend.

IMF deputy MD Anne Krueger said that despite considerable progress in SA, unemployment and poverty remained important challenges. She was in the country for consultations.

Analysts say unemployment, officially estimated at 26%, could emerge as one of the biggest threats to SA’s democracy as the country moves into its second decade after the end of apartheid.

“Unemployment is high by any standard and poverty remains widespread. More rapid economic growth is essential to achieve more rapid reduction in poverty ... That requires structural reforms across the economy,” said Krueger.

The IMF forecasts SA’s growth at 4% for this year, but saw potential to reach 6% with further structural reforms.

SA’s growth slowed to 3,5% in the first quarter of this year after expanding 4% in the fourth quarter of last year. The treasury has forecast average growth of 4,3% this year, up from 3,7% last year.

“At the moment we feel the 4% growth rate is probably what can be done without further reforms, which is why we put emphasis on them,” said Krueger.

“If we go by the experience of countries that have been able to maintain a moderate pace of reforms, they have been able to maintain growth of 6%. This is within reach with reform for SA.”

She said the labour market needed to be reviewed. Similar views have been echoed by analysts and the African National Congress (ANC).

“The review of labour laws and regulations and their impact of unemployment, with an aim of raising job creation, would help raise employment,” said Krueger.

On claims that the rand was too strong for the economy and was hindering growth, Krueger said the IMF had found no evidence to suggest this.

The ANC and the Congress of South African Trade Unions have called for policies that will weaken the rand to a “competitive” level to save jobs in the mining and manufacturing sectors.

The rand has depreciated about 16% against the dollar so far this year, making a small dent into three years of huge gains.

It was trading around R6,7685 to the dollar on Friday.

“There is no evidence that the level of the rand isn’t within the appropriate range,” Krueger said.

The strong rand has eroded exports, pushing the current account deficit to 4% of gross domestic product in the fourth quarter of 2004 — its biggest ratio in 22 years. But IMF mission head for SA Saul Lizondo said the widening current account gap was not a concern.

“The benefit for SA is that the fiscal policy is in order and the country has been accumulating sufficient reserves,” said Lizondo.

He dismissed suggestions that the Reserve Bank was not communicating its policy responses properly.

The central bank cut the repo rate 50 basis points to 7% in mid-April, citing the rand’s effect on some sectors of the economy. It kept rates unchanged last week, cautioning that inflation would peak at a slightly higher level than previously forecast.

“Communication is very difficult with inflation targeting. So there is bound to be some confusion from time to time, but there is no doubt about the bank’s intention to keep inflation down,” Lizondo said.

The IMF forecast inflation to remain inside the 3%-6% target range this year.


 * From: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A55746**