Interest rate cuts proposed to boost economy

Interest rate cuts are among the policy responses proposed to minimise the impact of the global financial downturn, African National Congress (ANC) treasurer general Mathews Phosa said on Wednesday.

The slowdown in foreign exchange due to the commodities “meltdown”, is one of the country’s biggest challenges, he told a gathering of the ANC’s Progressive Business Forum at Gallagher Estate in Midrand.

The challenge for government was to find “innovative solutions” to this and other consequences of the global financial crisis.

“Reserve Bank consideration of lower interest rates, as will now be done on a monthly basis ... [and] removing internal hurdles to competition,” were among the proposed responses outlined by Phosa.

“The banking crisis world-wide is reconfiguring itself in South Africa with an unacceptably high number of house owners due to default on their payments,” he said.

This placed social cohesion and the principle of ownership at risk, Phosa added.

“Declining commodity process and demand have a serious impact on our exports, which brings its own negative implications for employment.”

Due to these and other factors, government revenues were set to decline and business and consumer confidence were low, he said.

The expanded public works programme was in place to address this and the ruling party proposed an increased focus on the 2010 Soccer World Cup, increasing government spending in health and education and promoting external investment as other appropriate policy responses.

“In all of the above ...
our main aim will be to protect the vulnerable and do everything in our power to alleviate poverty,” he said.

Deputy Sport Minister Gert Oosthuizen told the forum the world’s financial woes did not seem to be dampening enthusiasm for the upcoming World Cup and Confederations Cup.

“More than 1,6 million applications [for tickets] have been received from almost 200 countries,” he said.

The country’s direct spending in the soccer spectacular stood at R15,6-billion, with the event set to contribute R55,7-billion to the country’s GDP and generate R19,3-billion in tax income.

The Confederations Cup later this year would be a “dry run” for the Fifa World Cup with South Africa hosting the world’s best players from across the globe.

“Gone is the gloom and doom, the doubts over whether a developing country like ours can indeed host such a huge event, gone is plan B and all the other countries that are supposed to be on standby,” Oosthuizen said, outlining South Africa’s readiness to host the sporting events.—Sapa

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