Tough times, but SA has a plan

2009-02-06 00:00

Cape Town — President Kgalema Motlanthe has issued a sober warning that the global economic meltdown poses serious dangers for South Africa’s economy.

Addressing a joint sitting of Parliament, Motlanthe announced the establishment of a task team to devise interventions aimed at addressing the economic crisis.

He warned that the goals of halving unemployment and poverty by 2014, and improving savings and providing access to basic services, might be badly delayed because of the worldwide crash.

Motlanthe said: “What, on the surface, started off as a financial crisis among a few lending institutions has exploded into a global credit crunch, with severe consequences for actual production and trade.

“We can decry the greed, the short-termism and the carelessness of managers of big corporations that precipitated the crisis. We can condemn the policies of governments that took their eyes off the ball and allowed the rapacious licence of unregulated markets to wreak havoc on financial systems. We can do all this; and we will be perfectly justified.

“Yet our central and immediate task is fully to appreciate the consequences of these developments on our own economy and our region, and devise responses that will minimise their impact especially on the most vulnerable sectors of our society.”

Motlanthe made use of his first and last state-of the-nation address as South Africa’s caretaker president to reassure the nation, saying that, despite the current economic storms and the political uncertainties, South Africa is in a good state.

“What we do know is that the regulatory environment in our country and the counter-cyclical budget policies we adopted have helped us avoid the worst impact of the crisis.

“But we are all too aware that, because we are strongly integrated into the world economy, demand for our exports has declined; access to finance and inflows of capital have turned for the worse; lower demand has precipitated a scaling down of production; the creation of jobs is negatively affected and in some sectors retrenchment has become a reality.

“These difficulties have coincided with a period in which inflation and interest rates are still too high.

“Combined, these developments bode ill for the revenues we need to expand the provision of services and to implement our infrastructure projects. As such, we have been forced to tone down our forecasts in terms of growth and job-creation.”

Motlanthe said the task team is “hard at work” dealing with interventions aimed at minimising the impact of the crisis.

“Firstly, government will continue with its public investment projects, the value of which has increased to R690 billion for the next three years. In this regard, where necessary, we will find creative ways to raise funds. This will include support by our development finance institutions and loan finance from international agencies, as well as partnership with the private sector and utilisation of resources controlled by workers such as pension funds.

The Public Investment Corporatrion, which controls R800 billion in public sector pensions, could be induced to invest in infrastructure projects. Legislation compelling all pension funds to similarly invest a portion of their holdings is not ruled out.

“Secondly, we will intensify public sector employment programmes. On the one hand, plans to expand employment in sectors such as health, social work, education and law-enforcement agencies will continue. On the other, we will speed up the introduction of the next phase of the Expanded Public Works Programme.

“Thirdly, mitigating actions can be undertaken within the private sector to counteract an excessive investment slowdown and unnecessary closures of production lines or plants.”

Motlanthe said the 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 because of the crisis. He said alternatives to lay-offs will be explored, including longer holidays, extended training, short time and job-sharing. This will be combined with promotion of the Proudly South Africa campaign and stronger action on illegal imports.

He said the fourth government measure will be to sustain and expand social expenditure, including progressively extending access to the child support grant to children of 18 years of age and reducing the age of eligibility for old age pension to 60 years for men.

“In addition, we will more widely utilise the Social Distress Relief Grant and food security measures specifically also to target those either unprotected by the Unemployment Insurance Fund or who have exhausted their benefits.”

Motlanthe said the government will also continue to pay special attention to the challenge of anti-competitive behaviour.

But all is not gloomy. South Africa must take advantage of unique opportunities — such as the Fifa World Cup and the Confederations Cup .

“Virtually all the projects and plans are completed or nearing completion … confirming the confidence of the global soccer fraternity that ours will be a truly successful tournament.

“And we believe that, after five consecutive wins, the national soccer team is now more confidently gearing itself to perform above expectations!

“But beyond this, the true legacy of this spectacle will be in our ability to showcase South African and African hospitality and humanity — to change once and for all perceptions of our country and our continent among peoples of the world. That depends on all of us; and to that we can attach no price!”

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