4 December 2008
South African President Kgalema Motlanthe believes the prevailing turmoil on international markets will greatly test South Africa’s economic policies, with the markets likely to get worse before they get better.
Addressing the 13the annual National Economic Development and Labour Council (Nedlac) in Pretoria this week, Motlanthe pointed out that the latest growth figures for the country’s economy indicated a tough road ahead.
“Whereas our economy had maintained a growth rate of close to three percent per annum, in per capita terms, from 2004 until early this year, the recent results show that we have entered difficult times,” he said. “The last quarter has registered a growth rate of 0.26%, which indicates that our growth prospects are taking a dive.”
Motlanthe said that the government was aware that more investments need to be made into transport and energy infrastructure, in order to deal with the constraints the country had experienced in the recent past.
“At the same time we need to address the ongoing challenge of ensuring an adequate supply of skills to the economy in both private and public sectors,” he said.
Motlanthe said the rise in inflation and associated interest rate hikes, and the relative weakness of the rand, had placed increased pressures on the South African economy, affecting the poorest of communities in particular.
Besides the sub-prime mortgage crisis that spread through the United States and Europe, he said that the recessionary pressure around the world and rising food prices would affect growth prospects in emerging markets.
He also noted that unemployment in the country was still unacceptably high, and that the gap between the rich and poor had widened. Even before the crisis broke, South Africa’s unemployment rate had already started to rise from 23.1% in the second quarter of 2008 to 23.2% in the third quarter.
Regarding the theme of this year’s summit, “Globalisation, growth and social justice – The role of social dialogue”, Motlanthe pointed out that there was nothing inherently destructive in the process of globalisation.
“It is a process that countries have to engage with in order to make globalisation a positive force for all people,” he said. “An important way in which we are engaging with globalisation is through our efforts at strengthening the regional economy.”
Motlanthe said the launch in August of the South African Development Community Free Trade Area was an important milestone in improving integration through increased regional trade.
Business Unity South Africa president and Nedlac’s Organised Labour representative Brian Molefe said emerging market growth was expected to halve in 2009, meaning South Africa would not be spared the affects of the economic slowdown.
“As demand for our commodities falls throughout Asia and Europe [with growth in these countries faltering], it is not a rosy picture for us at all,” he said. “In South Africa, we need a strong developmental state in order for business to strive.”