The constraints to growth are mainly structural in nature, but in the near term there are two main risks to the growth outlook. The first is the uncertainty of electricity supply. South Africa’s electricity supply has been constrained for some time, and has no doubt impacted on investment decisions in the economy.
As the time for the removal of policy accommodation draws near, those operations could be scaled up to drain more significant volumes of reserve balances to provide tighter control over short-term interest rates. The actual firming of policy would then be implemented through an increase in the interest rate paid on reserves.