(Updates with comments starting in second paragraph.)
June 21 (Bloomberg) -- South Africa’s economic growth is being held back by insufficient infrastructure and a one-in-four jobless rate rather than a strong rand, said Monde Mnyande, the central bank’s chief economist.
“Infrastructural and capacity constraints coupled with persistent high levels of unemployment continue to limit the growth potential of our country,” Mnyande said in a presentation in Johannesburg today.
The argument made by labor unions that the currency of Africa’s biggest economy is too strong and is making exports uncompetitive “doesn’t really tally” with its highest growth rate since the since the end of a recession in 2009, Mnyande said. “We’d like the rand to be in balance, which I don’t know where it should be, honestly,” he said.
South Africa’s gross domestic product grew 4.8 percent in the first quarter, equaling its fastest pace since the recession ended in the third quarter of 2009. The rand has strengthened 39 percent against the dollar since the end of 2008.
South African coal and iron-ore exports have been limited by a lack of transport capacity. A shortfall in electricity supply prompted Rio Tinto Group to scrap an aluminum-smelter project in 2009 and BHP Billiton Ltd., the world’s largest mining company, to partially close its Bayside aluminum smelter in 2008.
While the South African Reserve Bank predicts that inflation will breach its 3 percent to 6 percent target range in the first quarter of 2012, it has kept its key interest rate at 5.5 percent this year. Rising prices are caused by global oil and food prices rather than local demand, it argues.
The rand gained 0.3 percent to 6.7602 against the dollar at 9:56 a.m. in Johannesburg trading.
Continued growth will depend on the central bank curbing price increases domestically, Mnyande said.
“It is mostly agreed that stable monetary policy and subsequent price and financial stability achieved through inflation-targeting are prerequisites for sustained long-running economic growth with less cyclical volatility,” he said.
--Editors: Jennifer M. Freedman, Philip Sanders
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