South Africa’s Finance Minister Trevor Manuel has warned against adopting leftist policies after next year’s elections and said the current global turmoil had introduced vulnerabilities into the economy.
”We need to disabuse people of the notion that we will have a mighty powerful developmental state capable of planning and creating all manner of employment,” he told the Financial Times in an interview published on Tuesday.
”It may have been on the agenda in 1994 but it could not be delivered now. The next period is likely to see a lot more competitiveness in the global economy.
The African National Congress and its allies pledged after an economic summit two weeks ago to create five million jobs by 2014 and slash unemployment, which is estimated at about 23%.
Labour and communist voices have become influential within the ANC since they helped to elect Jacob Zuma to the party’s presidency.
The powerful Congress of South African Trade Unions and the small, but influential South African Communist Party, want a shift away from former president Thabo Mbeki’s market friendly policies, demanding a more relaxed fiscal and monetary policy.
But analysts say turmoil in global markets and the risk of a world recession will lead to slower economic growth this year and leave little room for the new government to manoeuvre policy.
The National Treasury said the deteriorating global environment will help slow economic growth for 2008 to 3,7% and 3% next year from 2007’s 5,1% expansion.
Worries over a wide current account deficit and risk aversion have seen investors dumping South Africa for less-risky markets.
The rand has lost as much as 40% to the dollar this year, stoking inflation fears at a time when consumers are also under pressure from interest rates that have risen by five percentage points in the past two years.
Manuel told the FT that as the dollar and borrowing costs become more expensive, South Africans might have to curb their appetite for imported goods.
”A lot of it [has been] financed by debt, easily financed to white South Africans and now as easily extended to high-income black South Africans,” Manuel said.
Speaking in September, Manuel acknowledged that the lives of many South Africans remained filled with despair.
”The harsh and ugly truth that confronts us is that … almost fifteen years into democracy, the everyday lives of many of our people remains as uninspired and as filled with despair as it was then,” Manuel said in a speech to honour late anti-apartheid activist Steve Biko.
Calling for more ”people’s power”, Manuel also urged ”a richer discourse” on black economic empowerment, a government-backed policy which has drawn criticism for enriching only a handful of ANC elites.
”We need elites that plough back, not elites that plunder,” Manuel said, adding that it was important to clamp down on corruption as part of a broader social contract between government, business and labour.
”The cost of failure is high … we will continue to battle with high unemployment and public services will remain poor for the majority of our people,” he said. – Reuters