Economic growth uneven, slow, says Gordhan

Friday, May 18, 2012

Pretoria - Economic growth is uneven and slow, Finance Minister Pravin Gordhan said on Friday.

"Growth in output in our own economy is uneven and slow, though consumption spending is still buoyant," the minister said, delivering the National Treasury Budget Vote in Parliament.

The minister described the current global environment as "dangerous" adding that global economic growth had remained weak this year.

Broad based transformation and extending opportunities to the unemployed were some of the challenges faced by South Africa.

The domestic economy, he said, was showing some signs of moderate growth but the external environment remained weak.

Data had shown that in the final quarter of 2011, household consumption and investment were still growing robustly. Consumption grew by 4.6 % in the quarter, investment by 7.2 % and government consumption grew by 7.3 %.

"National Treasury forecasts that household consumption and investment will continue to grow robustly in 2012, and government spending will also support growth," he said.

Also, Gordhan noted that monthly figures were volatile with investment being held back by uncertainties globally and domestically.

"The main risks to the economy remain external," said the minister, adding that political developments in the Eurozone had heightened the risk that Greece will exit the single currency within the next year, although there was little clarity on how this would be achieved and what its impacts would be.

"More serious for both the global economy and the potential impact on South Africa is the continuing vulnerability of several larger European economies, including Spain," said Gordhan.

He said he expected a shallow recession in the Eurozone but that the risk of a deeper contraction had grown since the Budget that was tabled in February.

Meanwhile, several African economies and the developing world continue to grow quicker than the developed economies with trade and investment patterns shifting.

He said both South Africa's international relations and trade and industry policies had to adapt to this rapidly changing global environment, with South Africa needing to join its African counterparts in boosting industrialisation on the continent and increasing intra-African trade.

The minister said the global financial crisis had also highlighted the inadequacy of international cooperation.

In order to find a growth path that reduces poverty, creates jobs and broadens participation in the economy, work on a long term fiscal report and guidelines is in process, as was requested by Parliament. The first report is to be tabled later this year.

Treasury has also stepped up its capacity to assess and support major infrastructure programmes.

Earlier this year, President Jacob Zuma announced the country's infrastructure development programme, in which more than R800 billion will invested until 2014.

On the issue of employment, a broad range of measures was needed especially for youth unemployment. These measures include stronger investment and growth through the infrastructure programme and addressing skills constraints and improving access to education.

"There have been a number of concerns raised with the proposed youth employment incentive. Discussions with social partners are aimed at mitigating these concerns," he said.

At a breakfast meeting hosted by the New Age and SABC this week, Zuma said discussions over the proposal would go ahead as government continued to find "multi-prolonged" strategies to tackle youth joblessness.

"We would like to see these issues addressed fully in discussion between social partners at Nedlac, but with urgency as the challenge of creating jobs for young people cannot be indefinitely deferred," noted Treasury.

The second phase in the review of procurement legislation will go ahead in 2012.

On the Jobs Fund, run by the Development Bank of Southern Africa, R1.8 billion has been allocated to 34 projects to date. This will be matched by project sponsor contributions of about R1.7 billion.

These projects are expected to generate about 102 000 new jobs, and over 50 000 placement and training opportunities, with a second call for proposals being issued.

Treasury will also report on lessons from the Neighbourhood Development Programme Grant, which will see about 85 projects under construction by the end of 2012. Work is already in progress on a broader framework for township regeneration and improved integration of urban landscapes