The International Monetary Fund (IMF) staff held meetings with South Africa from 26 May to 6 June, 2022 as part of their routine economic surveillance function, as prescribed in the IMF’s Articles of Agreement. The IMF staff discussed economic developments in the country with the Government, the South African Reserve Bank, state-owned enterprises (SOEs), business and academia. The visit by the Staff did not constitute a Board discussion or publication of a report on South Africa’s economy. 

The IMF staff formed a view that South Africa’s economic recovery from the pandemic should continue this year as some sectors including tourism, hospitality, and construction, gradually improve. It further noted that South Africa is benefiting from favourable commodity prices, which have raised exports. 

However, the IMF points to various shocks that continue to impact South Africa’s economic outlook; such as the flooding in KwaZulu-Natal, uncertainty arising from the conflict in Ukraine, tightening of global financial conditions and lower economic growth in China. 

The staff further acknowledged the  progress made in implementing structural reforms and encouraged South Africa to deepen and speed up implementation of structural reforms to address a number of obstacles. 

Key Areas needing urgent attention include: growth, load shedding, and addressing deficiencies in the transportation system which limit the benefits from the higher commodity prices. Other key reform areas emphasized include: improving procurement processes, transforming network industries, fostering competition to attract private investment; and advancing the functioning of the labour market. 

In addition, the Staff highlighted that operations, finances and governance of Eskom and Transnet should be improved to contribute to the sustainability of public finances. 

The Staff emphasised the need to implement growth-friendly fiscal consolidation to ensure that the country’s debt as a percentage of GDP is on a declining and sustainable path. Containment of compensation costs and streamlining transfers to SOEs were some of the recommendations tabled. In addition, the Staff underscored that operations, finances and governance of Eskom and Transnet should be improved to contribute to the sustainability of public finances.