PHILIPPE BERNES-LASSERRE, Johannesburg | Wednesday
THE economy in South Africa, as other emerging markets, has taken knocks after last year’s attacks in the United States and amid fears of global recession, but the worries here are stagnation in growth and employment rather than an Argentina-style crisis.
The rand sharply depreciated against key world currencies in 2001, losing a third of its value against the dollar in just a year to reach an all-time low of 13,85 to the greenback late December. By the end of January, it had firmed up to about 11,30 to the dollar.
Business people and financial analysts, some with feelings of hurt pride, have urged the government and central bank to stave off a rush of speculation which could take the economy to the cleaners. In 1974, the rand traded at $1,47.
“Financially this is a sound economy … Businessmen always say what they need is sound macro-economic policy. And we’ve provided that,” insisted the finance ministry’s director general, Maria Ramos, early this month, in words echoed by government members. “So the conditions for a financial crisis simply do not exist.”
The government stresses that South Africa remains economically healthy, with a robust banking and financial sector, a current account deficit expected at about a trim 0,3% of gross domestic product in 2001, and a low proportion of debt denominated in foreign exchange.
This is not comparable with Argentina’s situation.
President Thabo Mbeki has set up a judicial commission probe any “wrongdoing” that may have led to the fall of the rand by “persons or any other entity”, but the government remains stoical. “We’ve set targets and met those targets — on both the inflation and fiscal fronts,” Ramos said.
“The economic fundamentals speak for themselves … What we need is a mind shift on the part of South Africans, particularly white South Africans. We must begin to believe in ourselves and to grasp the opportunities offered by our country,” she added in an interview to the weekly Financial Mail.
“A collapse or a meltdown was never a likely scenario because of the structure of the debt,” agrees economist Ashgar Adelzadeh, a former professor at the University of the Witwatersrand in Johannesburg, now a research coordinator on African economic modelling for the United Nations University.
However, Adelzadeh warned, “you can’t go on saying the fundamentals are right when everybody knows you have around 30% unemployment, when you have such a huge access to (public) service problem, when you have such a huge Aids problem.”
An estimated 4,7 million of some 42,4 million South Africans are HIV positive.
“My estimation is that 57% of the population is under the poverty line of R533 ($46 /54 euros) per month and that’s not a lot,” said Adelzadeh.
Sluggish economic growth — two percent expected for 2001, after 3,1% in 2000 and 1,9% in 1999 — is well below the annual four or five percent rate that would create jobs, and remains a vulnerability of the economy, the International Monetary Fund concluded in May last year, well before the September 11 attacks. And before Argentina’s crisis.
In mid-January, economists, political scientists and trade unionists held a workshop and concluded that the rand’s fortunes at the end of last year threatened plans to keep inflation within the three to six percent range in 2002-2003. The prices of maize, meat, clothes, household products and books have already soared in the last weeks.
The consumer price index excluding the interest rate on mortgage bonds rose to 6,3% in December.
Similar doubts overshadow the economic growth forecast, even though Finance Minister Trevor Manuel revised it down to 2,4% for 2002-2003 last October.
These factors all hamper government plans for an economic shot in the arm to tackle its main declared foe: poverty.
The government faces mounting pressure to be “aggressive”, both by spending more to boost growth and by closing the door to speculation against the rand at the start of a year of uncertainty, particularly over the outcome of the March presidential poll in troubled, neighbouring Zimbabwe. – AFP