Global Imbalances and South Africa’s Growth Challenge: Insights from Ortiz and Weber
Recent remarks by Guillermo Ortiz, treasurer of the Group of Thirty (G30) and former governor of the Bank of Mexico, and Axel Weber, former president of the German Bundesbank, shed light on why South Africa’s economy remains stuck in low‑growth territory. Their comments, delivered during Tito Mboweni’s inaugural lecture in Cape Town, connect domestic constraints to broader macro‑economic forces emanating from the Global North.
The Current State of the South African Economy
South Africa’s headline GDP growth has struggled to breach the 1 % mark in recent years. According to Statistics South Africa, real GDP expanded by just 0.8 % in 2023, while the unemployment rate stood at 32.7 % in the fourth quarter of that year. Gross fixed capital formation—a key indicator of investment activity—has consistently lingered below 15 % of GDP, reaching approximately 13 % in 2022.
These figures place the country among the emerging markets facing persistent liquidity constraints, a situation Ortiz attributes to both domestic structural limits and external pressures.
Ortiz’s Diagnosis: Structural Constraints Amplified by Global Imbalances
When asked to explain South Africa’s subdued growth, Ortiz pointed out that “structural challenges make it difficult to access capital to develop catalytic infrastructure for emerging markets.” He noted that the same difficulties affect many Latin American economies, which have also experienced a stagnating growth trajectory.
Ortiz emphasized that the responsibility lies with policymakers to navigate these constraints:
“It is the job of politicians to work around these structural constraints … to achieve the desired goals. In this case, economic growth takes us out of this feeling of stagnation and strives for more equality or less inequality among economies.”
He warned that the current retreat into tariff‑centric policies—driven by rising U.S. debt, China’s export dependence, and the EU’s struggle to attract fresh capital—misdiagnoses the root cause. Global imbalances, he argued, are fundamentally macro‑economic, stemming from savings and investment disparities rather than trade policy alone.
Weber’s G7 Report: A Call for Coordinated Multilateral Action
Axel Weber’s lecture built on a report he co‑authored for the G7 economies, which flagged deep structural imbalances as a growing threat to global stability. The report highlighted:
- Excessive current account surpluses and deficits
- Weak investment and industrial overcapacity
- Elevated debt levels across advanced and emerging economies
- Diminishing international solidarity
Weber argued that these imbalances fuel trade tensions, amplify financial instability, and encourage protectionist pressures. To counter these trends, the G7 paper recommended:
- Stronger international policy coordination
- Boosting domestic demand in surplus countries
- Fiscal consolidation in deficit countries
- Renewed productivity‑enhancing investments
- Enhanced IMF surveillance
- Reforms to global trade governance
Weber stressed that unilateral tariffs or economic coercion are ineffective tools; instead, a coordinated multilateral response is required to restore balance and support sustainable growth in vulnerable economies like South Africa.
Tribute to Tito Mboweni: A Legacy of Resilience
The lecture also honored Tito Mboweni, South Africa’s first black governor of the Reserve Bank, former finance minister, and pioneering labor minister, who passed away in 2024. Ortiz recalled Mboweni’s skill in persuading Global South leaders to seize control of their own economic destinies.
Jacob Frankel, former governor of the Bank of Israel, shared an African proverb that Mboweni often cited:
“When elephants fight, the grass suffers. When elephants make love, the grass calls. Too bad for the grass. Well, Tito refused to accept that verdict. He said, ‘If I’m grass, either I’ll be an elephant, or I’ll be resilient.’”
Frankel used the anecdote to illustrate how smaller economies can either build capacity to withstand shocks from larger powers or develop resilience that allows them to thrive despite external turbulence.
Moving Forward: Policy Implications for South Africa
Taken together, Ortiz’s and Weber’s insights suggest a dual‑track approach for South Africa:
- Domestic reforms – Improve the investment climate, streamline regulatory processes, and prioritize infrastructure projects that unlock productivity gains (e.g., energy, transport, digital connectivity).
- International engagement – Advocate for multilateral solidarity, push for fairer global trade rules, and seek coordinated stimulus from surplus economies to ease liquidity pressures.
By aligning internal structural adjustments with external cooperative measures, South Africa can better navigate the current global imbalance and work toward growth that exceeds the current 1 % threshold, reduces unemployment, and lifts gross fixed capital formation toward healthier levels.
Ultimately, the message from Ortiz, Weber, and the legacy of Tito Mboweni is clear: while the challenges are significant, informed policy action—grounded in experience, expertise, and a commitment to international cooperation—can create the conditions for a more resilient and prosperous South African economy.
