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EXCLUSIVE: Pravin Gordhan says South Africa not headed for recession
March 7, 2014, 4:56 pm

Gordhan delivered the annual budget speech to Parliament in Cape Town on February 26 [AP]

Gordhan delivered the annual budget speech to Parliament in Cape Town on February 26 [AP]

South African Finance Minister Pravin Gordhan has told The BRICS Post that South Africa is not headed for recession despite a challenging global economic environment, and the first national power black-outs since 2008.

In an exclusive interview, Gordhan said that the state-owned electricity utility Eskom has been open and transparent about the status of its operations by providing bi-weekly systems status bulletins.

This communication has allowed companies and individuals to plan a means to cope with the rolling power black-outs that normally last only two hours at a time in a specific area.

“The system will remain constrained until the two new coal-fired base load power stations come on stream, but South Africa will continue to grow,” he said.

Gordhan reduced the government’s real gross domestic product (GDP) growth forecast to 2.7 per cent for 2014 from the 3 per cent forecast earlier, but this was markedly better than the actual increase of 1.9 per cent in 2013.

The Finance Minister said that the government had concluded three successful rounds of renewable energy projects from independent power producers, which had been praised for being world class in terms of transparency and execution.

National Development Plan

South Africa has had an average annual growth rate of 3.2 per cent in the past 20 years, but this has been not enough to reduce the unemployment rate from its current 25 per cent level.

The government’s National Development Plan is aimed at tackling unemployment by raising GDP to five per cent over the course of the next 20 years.

“The Budget tabled last week is just the first phase of the National Development Plan. We have successfully traversed the global economic shocks of the past five years, but have maybe not bounced back as effectively as we could have,” Gordhan said.

He said that South Africa’s rand currency appears to be stabilising after an overshoot and the export sector is responding to a more competitive exchange rate.

He added that some manufacturers may not have been as agile and responsive to the new opportunities, but that the government is there to help them quicken their response.

“What we are doing from the macro level is to impose fiscal discipline, so we have an expenditure ceiling. Within that ceiling you can then make hard choices about trade-offs, but it does help to improve the quality of outcomes as you learn to do more with less,” he said.

Developing the Eastern Cape

As the keynote speaker at the Eastern Cape 4th Annual Economic Symposium held in East London March 7, Gordhan said that the government was ready with its industrial incentive scheme to diversify the province’s manufacturing sector away from the world-class automotive sector.

An audience survey of the symposium showed that 12.8 per cent of respondents were totally depressed about economic prospects in the Eastern Cape, 21 per cent said prospects were unimpressive, and 41.6 per cent said they were average.

Only 18.3 per cent rated the province’s economic prospects as good, while 6.4 per cent believed they were brilliant.

“As a former pharmacist, I can recommend that there are some of you who should go on anti-depressants. What we are selling you is nothing but hope, but if you do not have hope, you have nothing going for you,” he said.

He quoted economist JP Landman;s book The Long View, and said South Africa needed to invest more in its social capital, which involved a level of trust between all stakeholders and a willingness to work together for the collective good.

“There should be no fault lines between insiders and outsiders. Our priority should be to look after all our citizens. We need to talk up our country and encourage an enterprising spirit. We must be as hungry for success as our BRIC peers, as in the global market place you need strong elbows. As bureaucrats we must remember to listen more than we talk,” he added.

Working with BRICS

The BRICS development bank, which was approved at the 2013 BRICS Summit in Durban, is moving ahead and the BRICS finance ministers and central bank governors would receive an update at the sidelines of the International Monetary Fund meetings in April, Gordhan said.

The next BRICS summit is to be held in Brazil in July 2014, but a firm date has not yet been finalised.

He said the South African government supported a negotiated peaceful settlement in the Crimea/Ukraine crisis and hoped the recent economic turbulence would ease.

He expected no change in policy if there was a change in government in India, as there had been previous changes in government in Delhi over the past 20 years and relations between South Africa and India had always remained cordial throughout.

Gordhan said the rebalancing of the Chinese economy towards more domestic consumer demand away from fixed investment and exports could result in lower commodity prices and volumes, but “we would have to wait and see to assess the impact of this structural change”.

By Helmo Preuss for The BRICS Post in East London in South Africa’s Eastern Cape