13 October 2008
South Africa faces a tough two years, but has the right economic fundamentals – including a highly rated financial sector – to weather the current turmoil in global markets, Finance Minister Trevor Manuel told the Sunday Times on the weekend.
Speaking to the Sunday Times from Washington, where he was attending the annual meetings of the International Monetary Fund and World Bank, Manuel said that while South Africans should expect changes, there was no call for panic.
While South African financial markets took a beating last week along with the rest of the world – the rand touched a new seven-year low of R9.49 to the US dollar last week, while the JSE’s losses for the year to date climbed to 29% – the country’s banks have escaped the worst of the storm, thanks to their lack of direct exposure to US sub-prime debt.
Manuel said the tough macroeconomic decisions South Africa had taken since 1994 had also stood the country in good stead, noting that SA’s banks were last week rated the 15th most secure in the world in the World Economic Forum’s Global Competitiveness Report 2008-09.
“That is a very important accolade,” Manuel told the Sunday Times.
However, while predicting that the storm would “pass us by”, Manuel cautioned that the government’s infrastructure upgrade programme would now cost more than expected, and that South African consumers should prepare themselves for higher prices.
“We need to understand that these are features of the next few years,” Manuel told the newspaper. “We need to know that this is not going to disappear after three months – this is two years and beyond that we are talking about.”
Given “the most uncertain economic outlook ever known,” the government would have to make adjustments, Manuel said, but should stick to its plans to upgrade infrastructure and services in order to position South Africa for the next wave of global growth.