November 19, 2018 / 2:29 PM / in a month

IMF says optimism in South Africa's economic recovery fading

A man walks past the International Monetary Fund (IMF) logo at its headquarters in Washington, U.S., May 10, 2018. REUTERS/Yuri Gripas

JOHANNESBURG (Reuters) - South Africa’s economic recovery plans face serious constraints with growing debt of state firms domestically and capital outflows as a result of global trade tensions, the International Monetary Fund (IMF) said on Monday.

In October the global lender said it saw Africa’s most industrialized economy expanding by 0.8 percent in 2018, down from a prior forecast of 1.5 percent. South Africa’s Treasury predicts growth of 0.7 percent.

The recession-bound economy and a bleak budget in October have piled pressure on President Cyril’s Ramaphosa.

“Some of the initial optimism has dissipated as growth remains stuck in low gear and reform implementation has faced constraints,” the IMF said, naming the state power firm Eskom as a key risk.

The president’s work is made harder by cash-strapped state-owned firms, including debt-ridden Eskom, which is struggling to supply the nation’s power.

The IMF said the proposal to amend property laws to allow for expropriation without compensation should be carefully considered and be guided by lessons of international experience.

“Land reform should focus on enhancing agricultural productivity and strengthening tenure security,” said the IMF.

A parliamentary team has recommended a constitutional amendment to make it possible for the state to expropriate land without compensation. The recommendation will now go to the national assembly for a vote.

Reporting by Mfuneko Toyana; Editing by James Macharia

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