Gordhan: We don't know where next shock will come from

Minister of Finance Pravin Gordhan (Netwerk24)
Minister of Finance Pravin Gordhan (Netwerk24)

Cape Town – South Africa is entering 2017 amid “a great deal of uncertainty” in terms of global politics and economy, said Finance Minister Pravin Gordhan on Monday.

Addressing delegates at the 10th national congress of the National Union of Metalworkers SA in Cape Town, Gordhan said he and National Treasury don’t know where the next global shock will come from.

“We haven’t seen the last shock and we don’t know where the next one will come from,” Gordhan said.

 He is particularly concerned about the impact that far-right political movements in the rest of the world could have on South Africa.

According to Gordhan the emergence of these “anti-establishment, anti-immigration” parties are a sign of an increasing distrust between ordinary people and the elite.

“That gap (between the elite and ordinary people) is growing. People are saying they haven’t reaped the benefits of globalisation.”

He said the United States president elect Donald Trump could take a much more protectionist stance than his predecessor Barack Obama, which could see the existing trade agreements with the US nullified.

In addition, Brexit in June, when the Britons voted to leave the European Union, will also see trade agreements being renegotiated.

Second recession

Gordhan emphasised though that he doesn’t expect South Africa to enter a “second recession”.

“We’re in the process of recovering,” he said. “Maybe we can push economic growth to 2%. Commodity prices have improved, consumer spending may improve if there’s lower inflation and it looks like some of the drought conditions are beginning to improve,” he said. 

Introducing Gordhan as a speaker, Numsa general secretary Irvin Jim said National Treasury focused far too much on inflation targeting instead of targeting job creation.

He was also critical of the pressure that ratings agencies put on government to curb spending. “But we’re not here to give you a hostile reception,” Jim said. 

"We take National Treasury very seriously. We want to request that we can have an open dialogue with you and National Treasury.” 

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