/ 14 March 2009

Motlanthe on economic crisis: This too shall pass

The gravity of the current economic crisis demands strong leadership from key players in our economy, President Kgalema Motlanthe said in Johannesburg on Saturday.

Speaking at the National Union of Metalworkers’ of South Africa jobs security conference in Midrand, Motlanthe said the country had not been immune to the global economic crisis.

”South Africa’s response to the international economic crisis called on all of us to develop sector-specific strategies and concrete action plans to respond to the global economic meltdown.”

”The current global economic crisis started as a financial problem in the developed countries,” he said.

He added that due to globalisation and the disproportional economic power relations, the impact of the financial crisis in the US and European countries spread to the rest of the world.

”For African countries in particular, the economic crisis just compounded the negative effects of the food and fuel crisis that manifested earlier in 2008. ”

”The crisis just puts more pressure on governments and their social partners in developing countries to tighten their belts in ensuring that the poor and the vulnerable do not end up absorbing the shocks of the economic crisis alone,” he said.

He said various approaches were taken by governments in responding to the financial crisis, from stimulating private-sector activity to community-driven projects and reallocating funds.

Motlanthe said that South Africa has been affected by the sharp fall in demand for its export products and the fall in prices of key export commodities.

”The result is that our growth expectations had to be sharply revised, downwards. ”

”The duration and depth of the downturn cannot be forecast with certainty, but growth is likely to be lower than previously expected at least in 2009, and 2010,” he said.

The president added that the economic situation required an effective collective response.

Social solidarity
”We all agreed that we need social solidarity between all South Africans to ensure that the crisis does not damage the fabric of our society.” ”Our collective responsibility is to work together to withstand the crisis and ensure that the poor and the most vulnerable are protected as far as possible from its impact,” he said.

In addition to this, he said, the country must ensure that the economy is ready to take advantage of the next upturn.

The manufacturing sector, which provides an important platform for stimulating growth, has not escaped the negative impact of the current global economic meltdown, said Motlanthe.

”All sectors of the South African automotive industry are experiencing a severe and unprecedented cash flow, profitability and viability crisis.”

”Already, the major vehicle producers are operating on a four-day working week reportedly to avoid large-scale retrenchments,” he said.

He added that as a result over 150 dealers closed their doors resulting in over 7 000 jobs lost and some 200 used-vehicle dealers have ceased operations resulting in a further 1 900 direct jobs being lost.

In addition, actual employment losses during 2008 in the component/vehicle parts sector amounted to just over 1 100 jobs, said Motlanthe.

”I have no doubt that the industry as a collective would again join forces and come up with innovative ideas on how to weather the current storm.”

”We need to commit to work together to limit the negative impact and mobilise and organise all those around to play a role in saving jobs and preparing to create decent work,” he said. He added that this depression or recession will come and will pass. — Sapa