Motlanthe reassures the nation

President Kgalema Motlanthe
(Image: The Presidency of SA)

Wilma den Hartigh

The global economic crisis and South Africa’s social grants were major priorities in President Kgalema Motlanthe’s State of the Nation Address on Friday.  He also assured South Africans that the nation is in a good state, despite the strain on the local economy and much political uncertainty.

He said South Africa could not ignore the global credit crunch and its consequences for production and trade. The government’s immediate task is to devise responses that will minimise the impact of the crisis, he said, especially on the most vulnerable sectors of society.

Motlanthe stressed that South Africa’s counter-cyclical budget policies had helped the country avoid the worst impact of the crisis.

“We are in a period in which others are experiencing or projecting recessions. South Africa and the rest of the continent are still poised for growth, even if at a slower rate,” he said.

The president announced that a task team was busy debating a number of interventions for the country. These include continued public investment projects, the value of which has increased to R690-billion for the next three years.

“Where necessary, we will find creative ways to raise funds,” he said. This will include support by development finance institutions, loan finance from international agencies, partnerships with the private sector and utilisation of resources controlled by workers such as pension funds.

Plans to expand employment in sectors such as health, social work, education and law-enforcement agencies will continue. The introduction of the next phase of the Expanded Public Works Programme will also be fast-tracked.  

He spoke of “mitigating actions” to be undertaken within the private sector to counteract an excessive investment slowdown and unnecessary closures of production plants. For example, government will adapt industrial financing and incentive instruments to help deal with challenges in various sectors, and also encourage development finance institutions to assist firms in distress. Alternatives to layoffs will be explored, including longer holidays, extended training, short time and job-sharing.

Many analysts and opposition parties welcomed the introduction of the task team, as well as the proposed intervention strategies.  

“What stands out is that the president spoke about the global financial crisis. It is an indication that government is not in denial,” said Judith February, head of the political information and monitoring service at the Institute for Democracy in South Africa.

She added that it was a “good steadying speech” that addressed how the economic crisis will impact on South Africans. However, she did express concern about the implementation of the initiatives.

Raenette Taljaard, director of the Helen Suzman Foundation, said Motlanthe approached the implications of the global financial crisis for South Africa in a very thoughtful way.

“He even made some suggestions of what can be done if we know that the credit markets are going to be closed for infrastructure,” Taljaard said.

Dr Pieter Mulder, leader of the Freedom Front Plus, largely agreed.

“Although the address was an election speech in a certain sense, the intervention plans are concrete and we welcome the task team discussions,” Mulder said.  

Social grants also came under the spotlight in the address. Motlanthe said government has over the past 15 years done its best to attack the scourge of poverty through the social wage. Income poverty among African and Coloured communities has declined, partly as a result of higher rates of employment and access to social grants. In 1999 the number of grant beneficiaries was 2.5-million. By 2008 this had increased to 12.4-million.

Research conducted by a team of academics at the University of Stellenbosch, led by Professor Servaas van der Berg, indicates that money-metric poverty declined substantially since the turn of the century. The reduction is to a large extent due to a dramatic expansion in social grants expenditure from 2002 onwards.

Among households that include children (aged 17 and younger), the number of households reporting that a child went hungry declined dramatically (from just over 31% to 16%) between 2002 and 2006. Evidence of the social wage is also seen in massive improvements in access to primary health facilities.

Despite these advances, Motlanthe said still more could be done.

“Government is painfully aware that abject poverty is still too widespread in our society and the level of inequality is too high.”

As part of the intervention plan, he said government will sustain and expand social expenditure, including progressively extending access to the child support grant to children 18 years of age and reducing the age of eligibility for old age pension to 60 years for men.

Helen Zille, leader of the Democratic Alliance, was critical of this emphasis on social grants, saying poverty-stricken South Africans need more than a “few hundred rand a month” to sustain themselves. Zille said what is needed is to grow the economy and create more jobs so that people can sustain their families and earn a honourable living.

Jacob Zuma, president of the ruling African National Congress, pointed out that the levels of poverty in 1994 were “beyond description” and social grants were necessary to address this situation. “It is important to begin to think how we can come out of this. We can’t have a country that depends on grants forever,” Zuma said, adding that an emphasis on education is an important tool to address this issue and lower the number of people dependent on grants.