The road ahead for the South African economy remains ”tough”, Business Unity South Africa (Busa) said in Johannesburg on Wednesday.
”Busa believes South Africa has technically ended its recession and that we see that inflation has dipped into the target band,” deputy CEO Raymond Parsons said about its outlook for 2010.
”These are positive signs, but they must not detract from the reality that our economy remains weak.”
Parsons said any economic recovery was likely to be gradual and it had to be acknowledged that there was still much that needed to be done.
”Our recovery will be a slow one in which the pace of the global recovery is an essential factor.”
Turning to growth, he said Busa forecast gross domestic product for next year at 2,2%.
”We also think that the current account deficit will be manageable and that inflation will fall within the target range.”
He said 2010 would be a year of recovery.
”But no shocks should be administered to the economy and one of those shocks could be Eskom, if there is a 35% tariff hike every year for three years,” Parsons said.
Busa’s CEO, Jerry Vilakazi, said in the past year Busa had done considerable work on the security of energy supply in South Africa and on the Eskom situation in particular.
”Busa believes a new funding model for Eskom is necessary, as well as a change in the regulatory regime.”
Vilakazi said next week Busa would make its formal submission to the National Energy Regulator of South Africa on Eskom’s latest tariff application. ”Busa believes that Eskom’s revised tariff application still needs to be critically evaluated.”
He said business remained concerned about the leadership issues at Eskom and in state-owned enterprises (SOEs) in general.
”We aim to engage with government in 2010 on our concerns of the state of SOEs,” Vilakazi said.
Parsons said the present economic environment underscored the importance of not losing sight of long-term competitiveness fundamentals amid short-term urgencies.
”Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built.”
An environment supporting competition could help the economy weather business cycle downturns and ensure that the mechanisms enabling solid economic performance were in place.
Asked for Busa’s opinion of African National Congress Youth League leader Julius Malema’s insistence that mines be nationalised, Parsons said: ”If you want a healthy economy you must have more competitiveness in this economy.
”If Busa was confronted with a choice between nationalisation and competition, it would choose competition.”
Parsons said this applied to Eskom as well.
”You shouldn’t have all your eggs in the Eskom basket,” he said.
South Africa had to raise its levels of competition.
”If you draw on the global experience you will see that there’s a lot to be said for the competitive model.”
Turning to monetary policy, Parsons said inflation targeting was ”useful”.
He added, however, that this did not rule out a debate on the policy.
”But inflation targeting has done us a lot of good … For the time being, Busa supports it until someone comes up with a better system.” — Sapa