South Africa's medium-term growth goal of 6% by 2010 is a 'bold and ambitious' target, but nonetheless achievable, International Monetary Fund (IMF) South African resident representative Vivek Arora has said.

Speaking to reporters in Johannesburg yesterday, Arora cautioned that, in order to reach the target, determined policy measures by government, including improved functioning of public enterprises, greater trade liberalisation and increased efficiency in the labour market, would be needed.

“If these measures are taken then, yes, 5% to 6% growth is achievable over the long term,” he said.

As things stand, the IMF has forecast that South Africa's economy will grow by 4,3% this year.

On the sustained rand strength, which has drawn criticism from the domestic manufacturing and mining sectors for continued profit squeezes and loss of export revenue, IMF deputy director for Africa Michael Nowak said that, based on a number of objective criteria, the IMF was confident that the currency value remains in line with macroeconomic fundamentals.

Nowak said that the rand's value could be partially explained by increased prices for the country's main commodity exports having appreciated in response to rises in platinum and gold prices.

He added that the response and resilience of the local manufacturing sector under difficult conditions had been a positive development, as there had been concern that the strength of the rand could serve to crowd out the country's export sector.

Zimbabwe crisis may prove investment deterrent

On the economic implications of Zimbabwe's mounting socioeconomic crisis on its neighbouring economies, Nowak said that the direct macroeconomic impact would be limited by the fact that Zimbabwe is trading less and less with other countries.

“But the primary impact is one of perception,” he cautioned.

There is a danger that investors unfamiliar with the region will see developments in Zimbabwe as a potential situation for other countries in sub-Saharan Africa.

Similarities are also drawn between the political histories of Zimbabwe and South Africa, Nowak said.

“This must be a concern for policymakers in the region.” He said that Zimbabwe was fast reaching a point where, even if policy action were taken, the loss of human and physical capital would mean the country might never be able to recover completely.

The IMF was also working to verify the sources of recent surprise repayments of long-overdue debts by Zimbabwe to the fund and would report to the executive board at a meeting in early March, Nowak said.