Global economic crisis hinders AsgiSA efforts

Thursday, April 16, 2009
By: 
Bathandwa Mbola

Pretoria - Interventions put in place by government to attract investment have been severely jeopardised by global economic events, says the Presidency.

"It can be said that this is not without foresight as the current economic crisis has the potential to impact severely on the economically marginalised," said Deputy Head of Policy Co-ordination and Advisory Services in the Presidency Alan Hirsch.

Mr Hirsch was speaking at the release of the 2008 Accelerated and Shared Growth Initiative for South Africa (AsgiSA) Annual Report on Thursday.

The reporting period, he said, coincided with the global economic meltdown, and some of the AsgiSA programmes had been critical to South Africa's relative resilience on a global scale.

He said the global economy had entered a difficult period with many major economies in recession and many developing economies growing much more slower.

Launched in January 2006, AsgiSA was born out of the need for government to direct more resources and investment toward infrastructure in order to help support South Africa's rapidly expanding economy.

Its mandate is to reduce unemployment and poverty, while increasing the country's gross domestic product growth rate to a sustainable level of 6 percent by 2010, through marshalling government and private resources to "eliminating" constraints.

The constraints then where identified as infrastructure backlogs, shortage of skills, poor international competitiveness, volatility of the currency, the weakness of the Second Economy and the inadequate capacity of government organs to support economic development.

To address these, government put in place programmes to eliminate these constraints. They included infrastructure investment, second-economy initiatives, skills and education (Joint Initiative for Priority Skills Acquisition), industrial policies and sector strategies, macroeconomic policy and governance interventions.

According to the report, infrastructure, which is one of AsgiSA's six priorities for intervention, has produced encouraging results, with meaningful growth in gross fixed capital formation, driven particularly by the public sector.

This is set to increase with the investment programme of government and state-owned enterprise for 2009 to 2012 valued at R787 billon.

"Indeed, the fact that we have a R787-billion AsgiSA infrastructure development programme in place means that we had a countercyclical government investment programme lined up before the world slowdown appeared on the horizon," said Mr Hirsch.

Other projects under the infrastructure programme included the public sector spending which indicated an increase from 4.6 percent of GDP in 2006/07 to 9.6 percent in 2009/10.

On second economy interventions, the report indicated that there was still much to be done, however there was a massive amount to gain from these initiatives.

Mr Hirsch cited ongoing efforts in the Expanded Public Works Programme (EPWP), particularly at local government level, and the primary sectors, particularly agriculture.

According to the report, the first phase of the EPWP reached its target of one million employment opportunities, while the second phase has a much higher target. The second phase which started this month has a R4.2 billion central fund to incentivise the project.

It also indicated that about 37 000 youth participated in the youth employment programmes in the 200/09 period.

On macroeconomic development, the overall result was that unemployment was reduced quite dramatically from a peak of over 31 percent in 2003 to around 22 percent by late 2008.

"Similarly, poverty fell quite considerably in this period, due to the expansion of social grants and higher levels of employment," reads the report.

The report further indicated that skills remain in relatively short supply, even though the country's performance in developing skills has begun to improve.

Economic growth averaged 3 percent for the period 1994 to 2003 and an averaged growth of over 5 percent from 2004 to 2007, which was during the AsgiSA period.

Real annual GDP at market prices increased by 3.1 percent in 2008, following an increase of 5.1 percent in 2007.

The slowdown in growth for 2008 was attributed to the electricity emergency in the first quarter of 2008 when growth of only 1.7 percent was recorded and a decline of growth of 1.8 percent in the fourth quarter as the global economic crisis started impacting on the South African economy.

Looking ahead, Mr Hirsch said this year much greater emphasis will be on the second economy and action on agricultural reform and development.

This will also include the implementation of the generation EPWP programmes and urgent actions to respond to the current economic slowdown.

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