South Africa needs new policies for faster growth-World Bank

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South Africa’s economic growth will fall far short of the government’s goal of 6 to 7 percent unless it changes policies including taking steps to boost the savings and investment rates, said the World Bank .

Even with the right policies it could take five years to create faster growth, the lender said in a report on Africa’s largest economy.

The ruling African National Congress unveiled its “New Economic Growth Path” last year and said it hoped to double annual growth in Africa’s biggest economy to 6 to 7 percent in a bid to make a dent in 25 percent unemployment, Reuters reports.

But the World Bank said growth was likely to stick close to current levels for several years to come.
“GDP growth is projected to be 3.5 percent in 2011, 4.1 percent in 2012 and 4.4 percent in 2013,” the report said.

The World Bank’s southern Africa economist Sandeep Mahajan, told a news conference there was “no quick solution” to putting South Africa on a different trajectory.
“You’re looking at 2015, 2016 at least before you see any effect if you start implementing reforms today,” he said.

He identified South Africa’s relatively low savings and investment rate as a major problem. Achieving 6.5 percent annual growth would require South Africa to lift its overall savings level from the current 16 percent to 30 percent, he said.

He urged the government to focus on spurring economic activity in the relatively impoverished black townships — a legacy of decades of white-minority rule — as the ingredients for explosive growth lay there, not in the wealthier and more sophisticated urban centres.
“The growth potential lies in the ‘second economy’. That has the potential to become an emerging market,” Mahajan said.

South Africa was admitted to the BRICS group of large emerging markets this year. Although quicker than developed economies, South Africa’s growth rate looks sluggish compared with India, China, Russia and Brazil, the four other members of the group.