Global economic power relations, the commodity cycle and food prices are some of the issues to be discussed at next week’s Group of 20 (G20) meeting in South Africa.
South African Reserve Bank Governor Tito Mboweni on Thursday said there is concern about the ”misalignment” of power relations in the global economic system, as reflected in the 1944 Bretton Woods agreement.
While emerging-market economies contribute ”quite significantly” to the world economy, their voices are not reflected in such institutions.
National Treasury Director General Lesetja Kganyago said there is a failure to recognise that the world is no longer what it used to be 63 years ago.
On the commodities cycle, Mboweni said while high prices for gold and platinum have benefited South Africa, global supply of and demand for oil is ”quite challenging”.
Another topic of discussion will be the ”massive pressure on food prices” and its effects on the poor. ”The emergence of the global middle class in countries like China, India and South Africa has put a lot of pressure on foodstuffs that were in the past only consumed by the rich,” said Mboweni.
Finance Minister Trevor Manuel said the eighth G20 meeting of finance ministers and central bank governors is ”probably the most significant gathering of economic policymakers we’ve ever had in South Africa”.
The delegates will have to ”grapple” with whether current commodity prices are part of a super cycle or part of a consistent trend, he said.
Subprime crisis
Mboweni said the subprime market crisis that started in the United States is also likely to be discussed as it has not yet reached its end. It is likely to complicate the work of the G20.
Following the crisis, investors have moved to safe havens such as US treasuries, which cause emerging markets to suffer.
Another issue that might come up for discussion is how to regulate the ”off-balance sheet activities” of banks. Some might argue for more regulation, others for leaving things to market discipline. ”Increasingly there are a large number of us who think we must find a middle ground.”
On possible exposure of South African banks to the subprime crisis, Mboweni said: ”I’m satisfied, based on the information I have today, that we’re safe.”
He said the world’s financial and banking systems are still ”robust and strong”.
Manuel said while the world does not know the extent of the mortgage-related losses banks face, it could run into ”a few trillion dollars”.
”The focus [at the meeting] is more likely to be on the quality of supervision [of banks],” he said.
Kganyago said another topic will be how countries will invest their massive current-account surpluses, created on the back of the commodities boom. — Sapa