Govt to act to protect SA from crisis

6 February 2009

The South African government and its social partners are considering various interventions to help minimise the impact of the global economic crisis on the country.

Delivering his state of the nation address at the opening of Parliament in Cape Town on Friday, President Kgalema Motlanthe said the crisis posed a serious danger to South Africa’s economy, which is strongly integrated into the world economy.

“With the economic crisis, lower demand has precipitated a scaling down of production, the creation of jobs has been negatively affected, and in some sectors retrenchment has become a reality,” Motlanthe noted. “These difficulties have coincided with a period in which inflation and interest rates are still too high.”

Zoopy TV: People flocked to the streets to observe South Africa’s President and Members of Parliament report for duty at the opening of Parliament in Cape Town on 6 February. Click arrow to play video.

As a result, Motlanthe said, South Africa, along with most other countries, had been forced to tone down its growth and job-creation forecasts, as well as its revenue expectations.

He said the government and its social partners had agreed to devise interventions to minimise the impact of the crisis.

Public investment and employment

“Firstly, government will continue with its public investment projects, the value of which has increased to R690-billion for the next three years,” Motlanthe said.

Where necessary, he added, the government would “find creative ways” to fund its infrastructure expansion projects. This would include support from South Africa’s development finance institutions, loan finance from international agencies, partnerships with the private sector, and the use of resources controlled by workers, such as pension funds.

“Secondly, we will intensify public sector employment programmes,” Motlanthe told Parliament. This would involve finding ways of expanding employment in health, social work, education and law-enforcement, as well as speeding up the introduction of the next phase of the Expanded Public Works Programme.

Private sector ‘mitigating’ steps

Thirdly, the President said, the private sector should take “mitigating” steps to counteract excessive investment slowdown and unnecessary closures of production lines or plants.

For its part, government would adapt industrial financing and incentive instruments to help deal with challenges in various sectors, and also encourage development finance institutions to help firms in distress.

Other alternatives are also to be explored, the President said, including longer holidays, extended training, short time and job-sharing. This would be combined with promoting the Proudly South Africa campaign and taking stronger action on illegal imports.

Sustaining social spending

Fourthly, the government would sustain and expand its social spending, including progressively extending access to the child support grants to children up to the age of 18, and reducing the age of eligibility for old age pensions to 60 years for men.

The government would also use the Social Relief of Distress Grant and food security measures more widely, in part to help people who were unprotected by the Unemployment Insurance Fund or who had exhausted their benefits.

“We shall also continue to pay special attention to the challenge of anti-competitive behaviour on the part of some of our corporations,” Motlanthe said, at the same time urging civil society to “enhance its own level of activism to ensure … that as input prices decline, the benefit is felt by the population.”

Government debt levels

Motlanthe said the government would continue to ensure that government borrowing levels remained prudent and sustainable, and pursue rapid reduction in debt levels whenever conditions turned for the better.

The President said he was optimistic that South Africa would be less severely affected by the crisis than many other countries, due to the country being transformed through fundamental macroeconomic reforms that, since 1994, had opened the way for the majority of South Africans to participate in the mainstream economy.

“Indeed, 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.

Source: BuaNews