Friday, September 11, 2009

Infrastructure investment will help SA survive recession: Manuel

Wednesday, 15 July 2009

The global downturn will weigh on South Africa's economy at least up to 2010 and government policies over the next 5 years will aim to cushion the poor and create jobs, Planning Minister Trevor Manuel said on Tuesday.

In a presentation prepared for the launch of a five-year policy framework, Manuel said the government would pursue its infrastructure investment programme to help the country pull itself out of its first recession since 1992.

Manuel, a former finance minister liked by investors, said the policy plan responded to the global meltdown which has particularly hit South Africa's key mining and manufacturing sectors.

"This is likely to have a huge dampening effect on economic growth in our own country at least up to 2010, with ... negative implications for investment, employment, incomes and government revenue," Manuel said in the presentation.

He said the medium term strategic framework (MTSF), approved by the cabinet on July 1, emphasised "a growth path which addresses the economy's structural constraints, expands the industrial base and creates decent work opportunities on a larger scale."

Halve poverty, unemployment by 2014
The programme aims to pursue government targets of improving access to quality education, curbing high levels of crime and corruption, bringing more land into the hands of majority blacks and halving poverty and unemployment by 2014.

"We cannot continue with the high levels of unemployment such as South Africa has," Manuel said. Official data showed the jobless rate leapt to 23.5 percent in the first quarter of 2009, when gross domestic product shrank by 6.4 percent after a 1.8 percent contraction in the last three months of 2008.

Manuel was appointed to a powerful new planning commission after an April general election. He defended the central bank's inflation targeting policy, slammed by labour unions as worsening the plight of the poor.

In pursuing its mandate, the central bank lifted interest rates by 500 basis points in the 2 years to June 2008 to rein in inflation, which has persisted above the top end of a 3-6 percent target band since April 2007.

The bank has reduced rates by 450 basis points since December, but unions want more aggressive cuts, and were angered by its decision to leave the key repo rate unchanged at 7.5 percent last month, as inflation holds stubbornly above target at 8 percent.

"I'm pretty satisfied that in dealing with (bringing inflation down) the Reserve Bank has demonstrated a reasonable mind and flexibility," Manuel said.