Gordhan talks tough realities and self-reliance

2014-02-27 00:00

INTEREST rates are likely to rise and economic times are going to be volatile.

That is ominous reality South Africans face according to Finance Minister Pravin Gordhan.

Presenting his annual Budget speech, Gordhan reminded fellow parliamentarians that the state of SA’s economy is intrinsically linked to the global economy, which ultimately will impact on growth, job creation and development.

And the picture seems bleak.

Quoting a G20 communique, Gordhan said, “… the global economy is far from achieving strong, sustained and balanced growth.

“We have already seen considerable swings in capital flows in SA and other emerging markets. Interest rates are likely to rise. Currencies will be weaker and volatile.”

The minister said the African continent was expected to grow at around six percent a year over the next two years. South Africa, however, was expected to have a projected growth from 2,7% this year to 3,5% in 2016.

Not mincing his words, he criticised the “self-justifying narrative” from some developed countries that accuse emerging markets of being the “problem” and that they should “get their houses in order”.

He said these were coming from places where huge regulatory failures led to the financial earthquake the world experienced since 2008.

“Geo-political gamesmanship is in the order of the day, collaboration in addressing global challenges is deferred and global statesmanship is in retreat,” he said in a hard-hitting tone.

The first priority in Africa will be to overcome poverty and inequality as the continent builds democratic institutions, expands its infrastructure and grows its trade and employment.

This will be done, he said, through initiatives “that shape our own growth path and partnerships that create our own destiny”.

He added, however, that the prices of the country’s largest sources of income remained depressed. The rand, he said, remain an effective shock absorber against global volatility. The lower rand was supportive of export growth.

He stressed that fiscal and monetary policies should ensure that inflation is kept low.

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