A few thoughts from Governor Marcus

ZA Confidential listened in to Reserve Bank governor Gill Marcus at the Financial Mail Top Companies Awards in Jo’burg today.

She said that much of the economic news is gloomy, our economy faces many challenges, and the world is in its 6th year of economic crisis.

There is an employment crisis of immense proportions, especially for the young.

Meanwhile, the recent deterioration in the exchange rates of many emerging market economies could mark a new mutation of the crisis.

Marcus said that ZA’s weak Q1 growth rate has contributed towards a weak domestic exchange rate.

She also targeted instability in the mining sector and other constraints, especially electricity.

She suggested there is room for fiscal and monetary support.

But financial markets are confused by monetary policy …. low growth should signal need for more accommodation, but there is a policy dilemma, as on the other hand, there are upward pressures on inflation.

Her core mandate is to keep inflation within the target range.

She noted five strengths and opportunities in the ZA economy:

– The emerging middle class

– Proximity to high-growth African countries

– Natural resources – in the minerals sector and our natural beauty

– The financial services sector is a recognized strength

– Then there is a strong legal framework and strong accounting framework.

But she warned again of constraints which are holding us back, and noted that because of electricity constraints the economy currently can’t grow by much more than 3 percent, until there is new generating capacity.

Certain new projects do not get off the ground because of electricity constraints.

Marcus spoke of the world class road infrastructure in Gauteng with improvements to certain sectors of the NH1 highway having cut travel times by 50% – while petrol consumption has also declined as less time is spent idling on highways.

Marcus expressed the hope for more private, public partnerships, saying the role of the private sector is essential, and long-term growth requires a partnership between the public and private sectors.

And she warned of woes in mining due to short term-ism in all sectors of the industry.

And she stated a major problem in the economy, that a lack of education or poor education is the biggest form of exclusion there can be.

Oh, and Coronation was given the top award.