Kganyago spurns talk of SA needing IMF aid

Sarb governor says problems ‘are within our grasp’.
Reserve Bank governor Lesetja Kganyago. Picture: Moneyweb

South Africa’s finances haven’t deteriorated to such an extent that the nation needs to tap support from the International Monetary Fund, and the government can avoid getting to that point, Reserve Bank Governor Lesetja Kganyago said.

Reports in the media and by analysts have speculated South Africa may be forced to ask the IMF for help. The economy contracted in the first quarter, unemployment surged to the highest in more than a decade and the government was forced to bail out its struggling power utility, adding to the state’s debt burden and widening the fiscal deficit.

The nation’s biggest business lobby warned in a letter to members this month that the government will need to seek a bailout from the IMF unless it halts the decline.

“We are not there yet,” he said after listing the conditions that would prompt an IMF package when asked by reporters at a lunch in Johannesburg. “These things are in our control, we have got to be able to take those decisions and make those trade-offs, then we wouldn’t have to take the bitter medicine.”

Those factors included a budget deficit that was out of control, and a state unable to contain spending with few options to raise revenue, he said.

The rand slid as much as 1.7% against the dollar on Wednesday in Johannesburg, weakening through 15 for the first time in two months. The currency was 0.6% stronger at 14.98 per dollar by 7:21 am in Johannesburg on Thursday.

Finance minister Tito Mboweni last month announced that the government will give Eskom, the state electricity company that posted a record loss in the year through March, an extra R59 billion bailout over two years. It would fund that through more borrowing.

Fitch Ratings cut the outlook on its assessment of South Africa’s debt to negative after Mboweni’s speech and said the bailout would widen the fiscal shortfall to 6.3% of gross domestic product this year, compared with the Treasury’s initial projections of 4.5%.

“We don’t have to get there,” Kganyago said. “These problems are within our grasp, we know exactly what must we done.”

© 2019 Bloomberg L.P.


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So where do we draw the line then?

Give us the debt GDP ratio’s, inflation, unemployment, deficit numbers that make IMF intervention essential.

A global recession now would tip us straight into IMF territory. But then we’d have to join the long queue of countries with our begging bowl and help won’t be so forthcoming.

The one thing that is clear on the economic front is: there are no reforms and there is no plan.. and even if there was, there is no ability to execute it.

Governor Kganyago said ““These things are in our control, we have got to be able to take those decisions and make those trade-offs, then we wouldn’t have to take the bitter medicine.”

Government taking control? Can’t get SOEs in order and municipalities.

I feel ashamed to be a South African……a once thriving land begging for money.

You don’t need to feel bad. Your demographic group did not drive us into this predicament. Your demographic group creates employment opportunities and pays taxes. People like yourself support a whole nation with social grants. You should feel proud actually. You are doing your best. You are the salt of the earth, a valuable citizen in any civilized country.

Even if we do cap in hand to the IMF, we will still be in good company. The UK was there in 1976 and the USA has defaulted on international debt in 1971 with the Nixon Shock. Yes, the almighty USA defaulted on its debt, and unilaterally broke international agreements and stopped the convertibility of the dollar for gold. We are on a fiat currency system because nations lived beyond their means, and went bankrupt under the gold standard.

So, here we are, bankrupt nations interacting with one another, trying to keep up appearances, using the fiat dollar, as if nothing happened.

“We don’t have to get there,” Kganyago said. “These problems are within our grasp, we know exactly what must we done.”

Governor, if only YOU were the finance minister; Mr Mboweni keeps promising there are no holy cows yet SAA is AGAIN getting a bail-out. You just can’t blame citizens for fearing IMF intervention because unless the ANC and alliance partners act DECISIVELY AND FAST, we ARE being downgraded by Moodys. And then we blame ONLY the ANC and alliance partners!

Too true – we all know what we need to do to fix the problems.
But it will be hard.
The ANC does not have the political will (or the ability) to fix what is broken and they will not accept IMF proscriptions either.
Ergo, the ANC cannot and will not fix the problems.
The outcome…. Zimbabwe, here we come.

….as in “grasping at straws” you mean, Kganyago?

“These problems are within our grasp, we know exactly what must we done.”

So please tell us:
1. What must be done?
2. What will be done?
3. When will it be done?
(Or is this action like the National Development Plan, that are being updated every few years so that we can feel good without doing anything?)

The story of SA is like something straight out of Shakespeare…a script of controversial humour from start to finish and the inevitable tragedy. Often the consequences that the characters brought upon thwmselves due to their own deviance and sinister intentions.

This country fought hard for democratic rule. Yet, after 2 or 3 generations it seems to be incapable of preventing a situation where it will have to voluntarily subject itself to be fed austerity measures by an institution that will refresh our memories.

Contrary to belief. An IMF bailout will be good for those working and paying taxes for a living. Not so much for those voting for a living.
SA’s bailout will not be like Greece. In Greece the IMF bailout had to fix the income side of the balance sheet. In SA the IMF will come and correct the expenditure side of the balance sheet.

Good news is that no incumbent government has ever survived the election after an IMF bailout.

Hope springs…..

Agreed,the IMF taking control of the county’s finances means that they will apply proper controls and stringent conditions as opposed to the ANC policy of no controls and take what you want. IMF could be the best thing to happen to SA.

Yes in Greece the problem was large scale tax evasion and over-generous government pensions. None of these apply to the few million taxpayers in SA. We are forced to pay our taxes and we don’t receive government pensions. I’m all in favour of reducing government social spending and taxing those who don’t contribute yet.

I disagree. What happens when you take away social grants from millions of people that have no other income. You get civil war… that is where I fear we are going when the money dries up.

Kganyago had better read the (2nd) book by RW Johnson, How Long Will SA Survive?

He is more than welcome to “spurn” all he wants. The numbers keep adding up, and they feel very little for the governor’s “feels”.

This is a continent of slow learners. Very slow.

They have to shoot themselves in the foot for the struggle to continue.

Shooting in the foot many many times.

Yes I believe we would all agree that an IMF bailout would be the best for SA in the long run BUT… do you really believe the ANC would ever allow an IMF intervention?
There is a far better chance of Bafana Bafana winning the next World Cup than that ever happening.
The cANCer has far too much to lose by allowing an IMF intervention.
Will never happen I’m afraid…

Going the IMF way: maybe the taxpayers will get more for their money.

End of comments.





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