Planning to leave the world of work
Resource type: News
The Irish Times |
by CLARE NULLIS
South Africa will boost spending on education, health and infrastructure projects even though the global economic turmoil is expected to cut growth rates, its finance minister said Tuesday.
Trevor Manuel argued that the South African economy will be shielded from the worst of the worldwide crisis because it has limited exposure to shaky foreign loans. But he acknowledged tough times lie ahead.
“The thunder will pass,” he said. “We can say to our people, our finances are in order, our banks are sound, our investment plans are in place. We will ride out this storm, whatever it takes, together.”
Manuel criticized “excesses” in the global financial sector, inadequate regulation and the presumption that “bankers who earn huge salaries and bonuses must understand what they are doing.” He blamed the United States and its annual budget deficit of $700US billion for encouraging “extremely destructive and toxic” global lending practices.
“Such blind faith in unfettered markets is misguided and has got the world into the difficulties we see now,” said Manuel, who has been in office for 11 years and is one of the world’s longest-serving and most-respected finance ministers.
Reports earlier this month that Manuel had quit caused more upheaval in South Africa than did the ouster of President Thabo Mbeki.
Although Manuel agreed to stay on under interim President Kgalema Motlanthe, it is unclear whether he will agree or be asked to serve under the populist Jacob Zuma, who is favored to win elections early next year. Zuma’s allies in the trade union movement and Communist Party want increased government spending and more policies to benefit the poor.
Manuel said the increased spending would result in a budget deficit of 1.6 percent in 2009 compared to a surplus this year. But he dismissed reports that economic policy would lurch to the left. “There aren’t going to be seismic shifts in policy,” he said.
In a typically ebullient mood, Manuel opened his press conference with a rendering of English football anthem, “You’ll Never Walk Alone.”
“When you walk through the storm, hold your head up high, and don’t be afraid of the dark,” he sang as he sought to reassure a nervous nation.
Manuel said the South African economy would grow by 3.7 percent this year down from forecasts of 4 percent and 3 percent next year because of the international downturn.
He predicted inflation rates, which peaked of 13.6 percent in August, would slow in the next two months to 11.6 percent for the whole year, and then drop back to 6.2 percent in 2009, he said.
Manuel ruled out government use of foreign exchange reserves to shore up the volatile rand, which has plummeted against the dollar in the past two weeks. He said it defied logic that the dollar should be so strong given the U.S. turmoil.
He said education and training was a top priority in order to reduce the country’s acute skills shortage and jobless rate of 23 percent. On health care, he said money should be spent on doctors and nurses salaries as well as prevention and treatment programs for the dual AIDS/TB epidemic. Funds should also be used to try to reduce stubbornly high infant and maternal death rates.
He said more money would be spent to improve infrastructure and ease rural poverty, and improve the chaotic criminal justice system.
Another priority is improving the rate of national savings and constructing a more market-oriented economy. He said the government would loan electricity utility Eskom 60 billion rands ($6US billion) to build new power stations and prevent a repeat of this year’s sweeping blackouts.
Manuel said government spending over the next three years would total 2.4 trillion rands ($240US billion) 171 billion rands ($1US.7 billion) more than originally envisaged.