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Economy can weather global slowdown

by Michael Appel
on 02 Jul 2008
BuaNews Online
BuaNews Online

Despite a global economic slowdown, resulting largely from rising food and fuel prices, South Africa's economy is resilient enough to deal with the unfolding current economic climate.

"We have a much stronger economy today then we did 10 years ago and increasingly we are showing resilience to global economic dips.

"We do not believe our economy has reached a cul-de-sac," says Trade and Industry Minister Mandisi Mpahlwa.

He said increasingly, investment was playing a greater role in the economic growth of South Africa.

Speaking from the headquarters of Business Unity South Africa (BUSA) on Wednesday, Mr Mpahlwa said South Africa was recently identified by a professor at the London School of Economics as one of four emerging economies in the world.

This placed South Africa's economy among China's, India's and Brazil's.

Since the 1990's, South Africa has emerged as one of the most important developing economies within the global economy.

"We might not have the size of China, India and Brazil, but we are regionally significant with a diverse and growing economy.

"We need to make sure that we remain in the stream of fast growing economies despite the challenging global economic environment," the minister said.

To ensure the diversification of exports, South Africa is currently in discussions with China to find ways in which to increase the market penetration of value added goods in to the Chinese economy.

The minister said South Africa was in the process of trying to reverse the scenario of only exporting raw materials to instead supplying value added goods on a greater scale.

Trade patterns are shifting at the moment, Mr Mpahlwa said, highlighting that the Africa-Asia trade was starting to surpass Africa-European Union (EU) trade.

"The trade balance is shifting more toward Asia with an increase in trade between developing countries," he said.

One of the greatest challenges facing the South African economy, however, is insufficient energy to meet rising economic demands, a shortage of skills, the need to increase productivity, and boost infrastructure development.

"We are not going to meet the skills challenge by importing skills as this is not sustainable. We need to look at doing things ourselves.

"The issue of insufficient energy, skills shortages, and infrastructure challenges is not unique to South Africa but is a global problem," Mr Mpahlwa said.

South Africa's widening account deficit comes as a result of South African manufacturers already running at capacity and therefore not being able to deal with increased demand ahead of the massive infrastructure drive for the 2010 FIFA World Cup.

South Africa was therefore forced to import goods to cover the local output shortage.

The account deficit is also being greatly affected by the global rising price of fuel, Mr Mpahlwa said.

South African manufacturers, he said, needed to reinvest in capacity in order to meet the growing demand in the country.

In the prevailing economic slowdown, South Africa must not lose focus of what it has set out to achieve.

"Now is the time to commit ourselves to more vigorously pursue these objectives."

Government highlighted four important factors to help in this regard, including the enhancement of economic efficiency; the speeding-up of industrial development; the continued support and promotion of Small, Medium and Micro Enterprises (SMMEs) and the strengthening of government capacity and capability to unlock economic potential within the economy.

The facilitation of greater regional integration within the Southern African Development Community (SADC) is also an objective that must receive greater impetus.

All SADC countries must take advantage of the almost free trade barriers that exist in order to maximise regional trade.

The department will be attending the Inter-Ministerial Meeting at the Doha World Trade Organisation talks on 21 July 2008.

Mr Mpahlwa said the talks would centre around discussions on agricultural tariffs and subsidies. - BuaNews

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