Africa closes in on SA's own growth target

Pretoria - Africa had almost reached South Africa's own economic growth target of 6 percent in the last two years, the Reserve Bank's Annual Economic Report released Wednesday revealed.

"The continent maintained a real growth rate of around 5 percent in both 2004 and 2005.

"There are indications that the robust expansion continued in the first half of 2006, making this the strongest and most consistent growth performance in recent history," the report noted.

Through the Accelerated and Shared Growth Initiative of South Africa (AsgiSA), South Africa seeks to achieve an economic growth rate of 6 percent by 2010 and halve poverty and unemployment by 2014.

Last year, South Africa recorded a real growth rate of 4.9, the strongest since 1984, the report said.

While the growth spurt in 1984 was short-lived, said the Reserve Bank, the economic expansion in 2005 formed part of a sustained and robust upswing which to date, has been the longest in the country's business cycle history.

It was further indicated that the local economy had become less dependent on commodities over the past quarter of a century, as the services sector increased in importance.

This year's second quarter Growth Domestic Product figures indicated the economy had grown by 4.9 percent, with most of this growth being attributed to the contribution made by the real estate, finance and business services sector.

The Reserve Bank also indicated that households were receiving more money in part due to Government's poverty alleviation efforts and tax relief.

The increases in households' disposable income were further attributed to rising employment and wage levels.

"Real final consumption expenditure by general government also rose as the delivery of various services was stepped up," the report said.

The report stated that strong growth in spending by public and private companies on activities, from electricity and communication to manufacturing and construction was offset by rising levels of debt.

Household debt relative to disposable income reached new record highs in each successive quarter since mid-2005.

This debt, the report said, was mainly incurred in order to acquire real-estate and consumer durables.

At the time, the cost of servicing household debt had remained moderate relative to disposable income, given the comparatively low level of interest rates.

However, the repo rate, [the rate at which the Reserve Bank lends money to commercial banks] has increased two consecutive times by 50 basis points and is currently at 8 percent.

This has led to banks in turn increasing their lending rates to consumers and resulting in increased costs to servicing debt. – BuaNews

Article by: Oupa Segalwe -