Sexwale says double-dip recession will be ‘detrimental’ to SA economy
Human Settlements Minister Tokyo Sexwale said on Friday called for a strong partnership between government, labour, business and civil society to grow the South African economy, saying that a second recession would be "detrimental". Speaking at the yearly meeting of the South African Chamber of Commerce and Industry (Sacci) in Johannesburg, the Minister noted that some analysts were predicting a W-shaped recovery, instead of the expected U-shaped economic recovery.
"At our current growth rates, which has been growing at an average of 4% of the last sixteen years, a secondary recession would be detrimental," Sexwale said. He emphasised that, in line with calls from President Jacob Zuma, South Africa needed to generate a strong, sustainable growth rate at around 6% to 7% to ensure its economic future.
However, such high growth rates would not be easy to achieve, he said, referring to 6% growth target by 2000, which was envisaged by South Africa's first democratic leadership - led by former President Nelson Mandela, in 1994.
"South Africa's biggest struggle has been to grow its economy at a strong enough rate to alleviate the significant stress felt by a large part of the population, with 40% of people that are able to work, not being able to find employment.
"There is a lot of work that needs to be done. Essential to this, is that all efforts need to be aligned and strong partnerships between key stakeholders including government, business, labour, and civil are absolutely critical in taking this country forward."
Also speaking at the event, South African Reserve Bank (SARB) chief economist and adviser to the Governor, Dr Monde Mnyande, predicted growth rates of around 3,2% and 3,3% for the remaining two quarters of the year. Mnyande also noted that even with the rand trading at very strong levels, real exports of goods and services had increased with around 18%, to key trading partners such as China, India and parts of Europe.
He reiterated the SARB governor Gill Marcus' statements that the bank would not be targeting specific levels for the currency, as it would be extremely costly for a developing country such as South Africa and very difficult to determine.
Meanwhile, Goldman Sachs MD Colin Coleman pointed out that the stronger currency was not necessarily a bad thing, but formed part of a type of "new normal" that the world's economy has entered, where developed countries would show anaemic growth, while emerging economies drives the global economy forward.
Goldman Sachs predicts an aggregated growth for the emerging BRIC (Brazil, Russia, India, China) countries of around 9% this year, while developed economies such as the US, and Euroland, would show an aggregate growth rate of about 2,7%. Coleman quoted figures that anticipated that the world had about a 15% chance of escaping from the recession that hit global markets in 2009, a 30% chance of a ‘double-dip' or falling back into a recession, and a 55% probability of continuing to behave in the space of a ‘new normal' economy.
"In the environment of a new normal world economy South Africa and Africa will become significantly more important and attractive economy to the rest of the world."
He said that the country had to take advantage of this "breeze from the back" and ensure that it had an enabling policy and business environment in place.
Further, Goldman Sachs predicted that the rand would grow stronger in this ‘new normal' environment and Coleman warned that businesses should plan and be prepared for this. Goldman Sachs forecasted that the unit would trade at R6,30 to the dollar in six months time, and R6,20 to the dollar in 12 months. This was compared with an average market prediction of around R7,23 in 12 months time.
This article was originally posted on South Africa Business Communities