Ayanda Shezi

Economics Correspondent

SOUTH Africans should not discount the prospect of economic growth reaching 6%, Absa economist John Loos said yesterday.

Just because the economy had not chalked up that pace of growth in the past, it was not an impossibility in the future, Loos said.

"Don’t laugh too loudly at the 6% growth target. It is not that far-fetched," said Loos.

He was responding to criticism by asset manager Citadel economist Dave Mohr earlier this week that the growth target set by President Thabo Mbeki was a "pipe dream."

Mbeki announced in July that a government task team had been established to tackle SA’s mammoth unemployment problem by boosting economic growth to 6% and above through increased investment spending.

Economic growth accelerated to 4,8% in the second quarter of this year, buoyed by a revival in manufacturing — the second-largest sector in the economy.

SA’s expanded rate of unemployment is 41%, according to figures by Statistics SA.

"A key constraint on economic growth is our dismal past economic performance, which clouds our vision of what the future may be," Loos said.

"Very often in the past few years the consensus forecasts for growth have been under-forecast. Also, few of us predicted the rand’s performance over the past few years."

In the first quarter of this year, the economy recorded disappointing growth of 3,5%, as growth in the manufacturing sector contracted for the first time since 2003, largely on the back of a strong rand.

"The current period of rand strength is the ideal opportunity to invest in extra capacity, with the cost of debt low by historic standards and imported capital equipment being cheap," Loos said.

But this would depend on whether one believed that the rand’s strengthening trend would last for a considerable period of time, or whether economic growth would be higher in the long term, the economist said.

Interest rates are at 24-year lows of 10,5% for the commercial banks’ prime lending rate, and 7% for the repo rate.

Loos said changes in certain government policies such as labour legislation, and improved performance of parastatals such as Transnet, would help the country’s growth "tremendously".

He said given the time it took for people to accept that times had changed permanently, if government could stay the course with its macroeconomic stability, this alone could raise the growth of the economy substantially in years to come by improving confidence levels.