Earlier this week, Gross Domestic Product (GDP) data released by the South African Reserve Bank (SARB) showed that the South African economy grew by 0.6% in the second quarter of 2014. This followed negative growth of -0.6% in the first quarter.
Tuesday's GDP release showed that the country avoided a recession.
The Deputy President said the key challenges to economic growth in South Africa are domestic.
“The economy barely grew in the second quarter, as mining and manufacturing production fell sharply and growth in other sectors remained modest,” noted the Deputy President.
Among the things that impacted the economy negatively were concerns around the reliability of electricity supply, strikes and poor service delivery. These were exacerbated by issues like low skills levels and widespread poverty.
The Medium Term Strategic Framework, which was recently unveiled by government, is aimed at tackling such issues. It is guided by the National Development Plan (NDP), with key priorities on economic policy including driving growth in the main productive sectors of the economy and the elimination of unnecessary regulatory burden.
The Deputy President said the central bank has a critical role to play in supporting the NDP.
Government seeks an economy that grows at no less than 5% a year. With this target in mind, the Deputy President said economic transformation and inclusive growth will not result from a single intervention but from a range of mutually supporting initiatives.
Government will continue to pursue a counter-cyclical fiscal policy where it saves during good times and spends to stabilise the economy during downturns.
Deputy President Ramaphosa said government sees a greater role for development finance institutions in supporting investment in agriculture, infrastructure, small business development, black economic empowerment and industrialisation.
“Banks will be encouraged to broaden access to financial services to enable people to build up their assets and to help small businesses to emerge and grow,” said the Deputy President, adding that measures to address poor lending practices and excessive charges will be introduced.
Government will continue to strengthen the regulation of financial institution to ensure that savings are protected and that customers are treated fairly. It also expects Postbank to play an expanded role in banking services.
While supporting the NDP, the Reserve Bank is a partner in making sure that the NDP is realised.
“A capable Reserve Bank is a crucial part of a capable state,” said Deputy President Ramaphosa.
The bank’s independence to execute monetary policy without fear and favour or regard for political cycles is a critical aspect of the country’s policy architecture, he said.
However, the Deputy President said independence does not mean that the bank is not accessible or account table as the central bank is accountable to the people of the country and reports to Parliament.
South Africa has been praised for the strength of its banking system and the quality of its oversight and regulation.
In his address, the Deputy President paid tribute to the bank and to Governor Gill Marcus, who was present at the conference, for the way in which the bank is run.
He also commended the bank for the manner in which the situation at African Bank was managed.
“The regulation of our financial sector is in good hands,” he said to the delegates’ applause.