22 July 2015
The sovereign debt crisis playing out in Europe is a stark reminder of the importance of a country’s fiscal stability and sustainability. Greece’s struggles show the dire consequences of what happens when there is a loss of confidence in a nation’s ability to pay its debts.
Since the start of our democracy we have always placed strong emphasis on how we manage our economy and this continues to form the base of our economic stance today.
Our prudent fiscal management and monetary policies have given rise to high levels of macroeconomic stability, promoted competitiveness and increased the economy’s outward orientation.
We experienced first-hand the repercussion of a poorly managed economy when, at the end of apartheid, the new democratic government inherited an economy that was technically bankrupt, had low growth and weak job creation.
The economic woes at the time stemmed from the long-term effects of apartheid’s distorted policies. Moreover, it was structured to serve the needs of some rather than all; it focused on the needs of corporations rather than people.
The key economic policy decisions implemented by the new dispensation over the years began to transform the economy and instilled strong confidence among international investors and South Africans alike.
This prudent stance continues to underpin our economic stability and fiscal discipline today. It has allowed the economy to remain robust where other countries have buckled under the tighter conditions.
In June, international ratings agencies Fitch Ratings and Standard and Poor’s affirmed South Africa’s stable rating as a result of the government’s fiscal consolidation and expectations for the economy to improve by 2017.
They acknowledged South Africa’s broad political and institutional stability, policy continuity and fiscal prudence that have helped to contain its fiscal and external balances.
While we are a far cry from anything close to Grexit, the heightened financial turbulence in Greece that could have seen its possible exit from the euro zone, we still need to pull together to support our economy.
President Jacob Zuma referred to this as our “collective responsibility” to get the economy to perform at its full potential.
South Africans can support the economy by buying a locally made products. Every purchase has a knock-on effect, stimulating demand for local products and services, building our industries and creating jobs.
Furthermore, everyone has a vested interest in promoting the country in this globally competitive environment. The manner in which we speak about the country affects its reputation among South Africans and the world.
The private sector also has an important role in driving investment and partnering with the government to develop the country. It is encouraged to match the government’s investment to help drive the economy.
The government, for its part, has declared the economy an apex priority and is creating the necessary environment for investment to flourish. Earlier this year, Zuma unveiled the Nine-Point Plan to ignite growth and deal with the economy’s main constraints.
Shale gas exploration
It is part of a “big push” that will stimulate key economic areas to catapult growth. As part of the plan new growth areas of the oceans economy, the green economy and shale gas exploration have been opened.
The approval of the final regulations for shale gas exploration has allowed the processing of applications from energy companies that are interested in exploring shale gas in the Karoo basin. A recent study by Royal Dutch Shell highlighted that extracting 50 trillion cubic feet in the Karoo basin would add $20-billion (R250- billion) to the economy every year for 25 years and create 700 000 jobs.
Our investment in ocean economy industries such as marine transport and manufacturing, off-shore oil and gas exploration and aquaculture has the potential to contribute R177-billion to gross domestic product and create just more than a million jobs by 2033.
As part of the Nine-Point Plan, we will also tap into the employment potential of the agricultural sector. The government will invest R2-billion to establish agri parks in all 53 district municipalities to create employment opportunities.
The government is targeting the small business sector and has set aside 30% of state procurement for small businesses and co-operatives. A framework to strengthen and regulate the informal business sector is also being developed.
Through the plan, the mining value chain for new manufacturing sectors is being promoted and an agreement with mines to procure up to 70% of mining inputs from local manufactures is being finalised.
Our efforts are guided by the National Development Plan, aimed at sustained growth, higher investment and a deracialised economy that benefits all.
The government is putting every effort to manage the economy effectively and realise its full potential. With its sound economic footing the country will emerge stronger and more resilient.
Leslie Sedibe is the chief executive of Proudly South African