S.Africa to fight economic slowdown with spending

CAPE TOWN - An ambitious spending programme to fight poverty and unemployment will help shield South Africa from the serious threat posed by the global financial crisis, President Kgalema Motlanthe told parliament on Friday.

By (Reuters)

Published: Fri 6 Feb 2009, 7:03 PM

Last updated: Thu 2 Apr 2015, 3:54 AM

Although Africa’s biggest economy and financial system has not been as hard hit as some, senior officials have said it cannot expect to remain insulated from the crisis. Growth had been slowing even before the global storm hit.

In a state-of-the-nation address, Motlanthe said the African National Congress-led government would spend 690 billion rand ($70 billion) in the next three years to reduce poverty and increase employment.

He added that borrowing levels would be kept ‘prudent and sustainable’ as the government enacted what he described as a counter-cyclical fiscal policy.

‘We should not underestimate the challenges we face. The global economic meltdown does pose serious dangers for our economy in terms of job losses and the quality of life of our people,’ Motlanthe said.

Countries around the world are planning big increases in spending to try to reduce the impact of the financial crisis.

The spending in South Africa comes amid investor concerns that the ruling ANC is planning to tilt left after the next general election, which is expected in April.

Motlanthe, who took over from former President Thabo Mbeki after he was ousted by the ANC last year, is seen as a caretaker president and is widely expected to step down after the election.

ANC leader Jacob Zuma is the frontrunner for the presidency, though his future is clouded by a corruption case. Zuma has strong ties to labour unions and Communists.

The Congress of South African Trade Unions (COSATU) welcomed Motlanthe’s speech.

‘It committed the country to policies which can take us through the looming economic crisis and keep us on course for the revolutionary transformation of South Africa and the creation of a better life for all,’ it said in a statement.


Johan Botha, an economist at South Africa’s Standard Bank, said Motlanthe’s government had outlined a sound approach to the economic downturn, especially in its plan to invest in the country’s infrastructure.

‘I think that’s absolutely required at this stage,’ Botha said. ‘It’s not, I would submit, a swing to the left. It’s something that has been in the pipeline for quite some time now and it’s really just a continuation of that.’

Zuma has repeatedly tried to reassure the business community that the government will maintain centrist policies credited with spurring nearly a decade of sustained economic growth.

South Africa’s economy, largely centred on mining and agriculture, grew an average 5 percent annually between 2003 and 2007, but has been pinched by a power crisis and the global economic slump.

The Treasury has forecast growth to dip below 4 percent from about 5.1 percent in 2007. Some economists have warned that the country could fall into recession in 2009.

Motlanthe said the government would take initiatives to protect jobs, including helping arrange financing for troubled companies and intensifying public sector employment programmes.

The unemployment rate is just above 23 percent.

He also promised the government would continue to fight one of the world’s worst rates of violent crime, shore up the shaky electricity system and ensure the nation hosted a successful World Cup soccer tournament in 2010.

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