IMF praises SA focus on Eskom and logistics

IMF MD Kristalina Georgieva says South Africa should clear obstacles to growth if it is to realise its potential.

Georgieva, who is serving a second five-year term at the helm of the global lender, commended the work done by the South African government to ease energy supply constraints.

“It is disappointing to see that growth is below 1%,” she told journalists at an IMF sponsored training programme on financial reporting, conducted by the Thomson Reuters Foundation in Santiago, Chile on Thursday.

“The electricity interruptions are terrible for the economy, they are bad for the people. There are steps now taken to get Eskom to improve and to get the logistics sector to improve. I want to praise the government for focusing on it.

“There is a structural problem in South Africa; people live in one place and their jobs are in another — they need to find jobs far away and that creates problems with productivity, transport, logistics. It is not an easy problem to resolve but needs resolution otherwise you will not get the best out of the country.”

Georgieva said structural reforms are needed to improve productivity and ensure labour market agility, while corruption has to be tackled to increase potential growth. “Clear the obstacles to growth and don't stand in the way of economic promise.”

South Africa is lagging behind its emerging-market counterparts. In April the IMF reduced its economic growth projections for SA from 0.1% to 0.9% in 2024 and 1.2% in 2025, compared to Nigeria’s estimated 3.3% growth in 2024, and 3% growth in 2025. Brazil is set to grow by 2.2% in 2024 and 2.1% in 2025. 

For the rest of the world, the IMF expects 3.2% economic growth in 2024.

Georgieva said the pandemic, war in Ukraine, cost-of-living crisis, and the war in Gaza are some of the “repetitive shocks” for the world economy over the past four years. 

“What we have seen is that inflation that has been hitting poor people dramatically, it is going down almost everywhere but it is not gone, and that means attention to bringing inflation down remains a number one priority in many countries.”

Before we fund programmes [we make sure] spending on education, health and social protection does not get squeezed

—  Kristalina Georgieva, IMF MD 

Since the outbreak of Covid-19, the IMF has advanced over $360bn (R6.66-trillion) in financing to 100 countries and has done the largest allocation of special drawing rights in its history, an equivalent of $650bn (R12.03-trillion). This means the IMF has injected $1-trillion (R18.51-trillion) in liquidity to help member states.

“When Covid-19 was announced in March 2020, in one week we disbursed the first emergency funds and since then we have responded pretty much to every request for emergency financing in a very efficient, very rapid manner. The IMF today is like a ship that is steady in choppy waters”.

The IMF governing board requested members to up their quotas by 50% to increase the funding pool, resulting in $360bn to support low-income members who are offered loans at zero interest rates. In addition, low- and middle-income countries under threat from the affect of climate change receive loans with 20-year repayment terms, Georgieva added. 

The global lender says it is addressing criticism that it overlooks the vulnerable in society when it makes lending decisions. 

“Many of our members, especially civil society, have been concerned the fund does not pay attention to the most vulnerable members of society when we design programmes to bring the fiscal situation in a particular country into good shape.”

In 2018 the IMF adopted a policy on prioritising social spending. “Before we fund programmes [we make sure] spending on education, health and social protection does not get squeezed.”