Finance Minister Trevor Manuel reiterated on Thursday that South Africa’s economy was not in recession, saying growth numbers for the last quarter of 2008 as well as the first quarter of this year would give more pointers.
Manuel told Parliament in a budget speech on Wednesday that 2008 GDP growth estimates were lower at 3,1% and said domestic output would continue to expand this year — despite a recession in major economies — albeit at a much smaller 1,2%.
“We’re waiting for the fourth quarter numbers to come and then we have to see what the first quarter looks like, but on past performance we are not in recession,” Manuel said on Thursday in response to a question at a post-budget breakfast meeting.
Lastest figures show manufacturing, South Africa’s second largest sector, contracted by 7% in December.
Consumer demand is also depressed, partly due to the central bank hiking interest rates by 500 basis points over a year two year period to June 2008, to try and tame inflation.
“Although it sometimes feels in people’s minds that the economy is in recession … as of now we are looking at positive growth,” Manuel said.
The Reserve Bank has cut interest rates by 150 basis points in an unwinding cycle that began in December last year, amid signs that inflation pressures are ebbing, while the economy is under strain.
Manuel said that in the face of stiff headwinds from offshore it was critical to employ policies that kept the country’s economy alive without scurrying off to the capital markets to raise debt.
Partnerships
Manuel said the global economic crisis was a major setback in terms of the fight against poverty in Africa.
Manuel said that the Millennium Development Goals — which include the aim of halving unemployment — could be set back by seven years.
But he also said that the aim of merely halving unemployment did not sit well with him. “What do you then say to the other half?” he asked.
Manuel said everyone had a role to play in the fight against poverty, and not just the government.
“Don’t ask what the government will do, ask what we will do together.”
He added: “It is less a money problem than a partnership issue.”
“It is going to be about what happens in the debate — in the towns and cities — that will make the difference.”
Balance
Manuel said that the key to budget planning was striking a balance and not just giving money away.
He highlighted welfare grants, education and training authorities (Setas) as examples of this.
He said that when it came to child support grants, conditions, such as education, had to be attached.
“This is not for people sitting on street corners, but if people are in school then their families must be supported,” he said.
He said the issue also boiled down to affordability.
“There must be long-term benefits and it must not be dependence-producing. These are long-term challenges,” said Manuel.
He said that education spending was rolled out on a per capita basis and that here too, balance was necessary.
“If you ignore a public school in a leafy suburb it will quickly become a private school using state assets,” he cautioned.
Manuel also raised an open question about the output of Setas, noting that a vast amount of money was being spent on them.
“We must ask if what is happening there is appropriate,” he said.
Pssst! Wanna buy an airline?
Manuel said that holding an airline as an asset is a “problem” but that this didn’t mean action should not be taken to try and protect the asset.
He also asked members of the audience whether they were interested in buying a stake in an airline.
“That is the problem you have with airlines — you either let it go under or you do something else,” he said.
Manuel said on Wednesday that South African Airlines is to get a cash injection to help it meet the costs of restructuring and to ensure financial stability.
“We are budgeting for R1,6-billion for South African Airways to support its turnaround strategy, which includes reducing costs and improving efficiency,” Manuel told the National Assembly as he presented his Budget on Wednesday.
“I am sure that the House will agree with my hope that this will not be a recurring allocation.” – I-Net Bridge