Karin Strohecker and Rachel Savage

LONDON, (Reuters) – Rising energy prices since Russia’s invasion of Ukraine have been a major concern for South Africa’s economy. Finance Minister Enoch Godongwana stated that Friday’s statement was a warning sign, although it is too early to assess the impact of last week’s catastrophic floods.

Godongwana said that it was not clear if the high commodity prices South Africa exported, such as gold and platinum, would offset this. He spoke to Reuters via video from Washington during the International Monetary Fund spring meetings.

After Russia’s invasion of Ukraine, inflation has increased worldwide, particularly in food, fertiliser, and fuel. The U.S. Federal Reserve raised interest rates and locked down China added to the pressure on the global economy.

Godongwana declared that “energy prices are of great concern.” Fuel prices can be pervasive and cause food prices to rise. This is a growing concern.

According to him, disruptions to Durban port operations due floods that killed 435 and damaged KwaZulu Natal’s infrastructure (at least 10 billion rand) would affect commodity exports.

It is too soon to assess the economic impact of floods on the wider economy.

The country had one of the highest performing currencies worldwide this year thanks to metal exports. However, it fell 7% this week due to the flooding and severe power cut that has long held down the country’s economic growth.

CHINA-AFRICA FINANCING

Godongwana stated that the IMF meeting also highlighted the lack of progress on the debt sustainability issue. He welcomed the “breakthrough” achieved by China’s Thursday pledge to be a member of the creditor committee responsible for restructuring Zambian debt.

China is the country that has slowed progress with regard to Zambia. Their approach is not wrong. They have taken a “case-by-case” approach,” he stated.

Godongwana called China’s lending approach in Africa “aggressive”. However, he said it could have reached saturation both from China’s perspective as well as because borrowing countries realize that the loans are as strict as any other.

A report from Baker McKenzie International shows that Chinese bank funding for African infrastructure projects fell to $3.3 billion by 2020 from $11 Billio billion in 2017.

Godongwana explained that China decided to go case-by–case because it is more likely than any other country to lend money on the African continent.

This suggests it could have been a problem to China’s lender as well as the recipient.

Godongwana stated that the African government would meet in May to discuss the Common Framework. This is the restructuring of debt created in response to coronavirus pandemic.

He stated that “there’s very little adoption, which indicates that the policy design is not working.”

Chad, Ethiopia, and Zambia asked for assistance from the programme more than a year back and have still not received it.

($1 = 15.6150 rand)