SA unlikely to reach 2% economic growth before 2030 - Citi economist and IMF

Years of slow economic growth have left South Africans poorer than the global average, that is what the numbers show.

And Citibank SA economist Gina Schoeman says it's unlikely that the economy will reach 2% growth before 2030, which the International Monetary Fund (IMF) agrees with.

During his Budget Speech in May, Finance Minister Enoch Godongwana revised down estimated real GDP growth to 1.4%, from the 1.9% projected in March.

Schoeman does put some positive spin on the context of the forecast, noting that at least it is on the way up and we are looking at 1-1.2% growth for 2025.

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She notes that the IMF will always give that longer five-year forecast, but Citi does also see some more upside risk from year three onwards.

"At least it gives SA a realistic hope that if the structural reforms we're embarking on actually emerge and perform in a strong enough way to convince the private sector to invest more, then sure, getting above 2% in three years' time would be more likely than what it is looking like now."

Is the main problem holding back our economic growth then this lack of private sector investment, which points to a lack of confidence?

This is how Schoeman puts it:

"I wouldn't say it's the lack of private sector investment that's the problem - the problem is there isn't a strong enough investment case yet for the private sector to deploy that kind of investment and be guaranteed a sufficient rate of return on it."

Like Schoeman, Professor Adrian Saville from the Gordon Institute of Business Science (GIBS) highlights what can be the folly of forecasting, in the sense that we don't know what might possibly get in the way of that five-year 2% growth forecast.

He states very strongly that the critical missing ingredient in any case, is gross domestic fixed investment.

"You can dress this up as much as you like, but until such time as SA gets into serious gross domestic fixed investment activity, the economic growth will be anaemic."

For more detail on South Africa's growth outlook, listen to the interview audio at the top of the article