Adjusting South Africa’s monetary policy would not be enough to dig the nation out of its economic slump, and the country’s economy would need to be re-engineered, said National Treasury director-general Lungisa Fuzile at a recent debate on the country’s economic outlook hosted at the Gordon Institute of Business Science. He said the risks to economic growth had intensified, but that South Africa had the ability to turn the situation around.

South Africa’s official growth forecast had been revised downwards to 0.9% in 2016, from 1.3% in 2015, and had been decelerating since a post-2008 financial crisis rebound. However, the International Monetary Fund downgraded its forecast to just 0.1% for 2016 and the National Treasury would probably moderate its position when it provided an update in October.

A 26.7% unemployment rate, low job creation, slowing household consumption, higher inflation, weak commodity prices, electricity constraints and slower-than-expected global growth were some of the factors impacting on the economy.

“The biggest challenge that most countries face, including our own, is that our economies are not growing fast enough, certainly post the 2008/9 financial crisis,” Fuzile commented, adding that the subdued economy left too many people behind.

Manipulating fiscal policies or macroeconomic variables such as raising taxes or reducing policy rates would be less likely to provide the upliftment the country needed.

“We need to re-engineer our economy,” he noted, pointing optimistically to the “great strengths” South Africa could draw on to mitigate the challenges it faced.

South Africa had strong institutions, a robust legal framework, well-developed and deep capital markets, and a good portion of its gross domestic product spending on infrastructure, among other positive qualities.

This was offset by a volatile and uncertain global environment, which limited certain external stimuli; low domestic business confidence and investor sentiment; and a narrowed opportunity for fiscal and monetary stimulus. The lower commodity prices also undermined the performance of the private sector.

However, the revival of economic growth was possible through the National Development Plan and the nine-point action plan.

Government was currently working on reducing infrastructure constraints and bottlenecks, improving the ease of doing business, increasing policy certainty and coordination, enhancing labour relations and promoting labour market stability, enabling the expansion of the South African industry to the rest of the continent and supporting private investment.