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Government policies can lift growth in South Africa

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Staff writer ▼ | February 3, 2016
Government policies that promote greater domestic competition and improve the regulatory environment could lift growth, says the South Africa Economic Update by the World Bank.
South Africa
Africa   Weaker commodity prices and lower Chinese demand
The report’s forecast for real GDP growth is at 0.8 percent in 2016, down from 1.3% 2015 and the lowest rate of growth since 2009, weighed by a combination of external and internal factors.

They include weaker commodity prices, lower Chinese demand and rising U.S. interest rates as well as policy uncertainty, infrastructure gaps and a severe drought at home. Growth is forecast at 1.1 percent in 2017.

Overall, South Africa is projected to remain largely below the average growth rate of 4.5 percent for Sub-Saharan Africa in 2016–2017. Against this backdrop, poverty in South Africa is set to rise as incomes fall, placing the National Development Plan goals of the eradication of extreme poverty, reduction in joblessness and doubling of incomes by 2030 further out of reach.

A simulated scenario in which South Africa reduces regulatory restrictiveness of professional services sectors suggests that the value added of industries which use these professional services intensively would increase by between $1.4 - 1.6 billion.

The report highlights the cases of two key input sectors - cement and telecommunications - to examine how competition enforcement and an effective regulatory environment can help promote competitiveness and faster economic growth.

In the cement sector, the busting of a regional cartel, followed by the first entry of new firms in 80 years, lowered cement prices, whilst generating investment and creating jobs. Prices in the cartelized cement markets are estimated to have fallen by 7.5-9.7 percent higher once this cartel was broken.