Govt considers interventions to protect SA from economic crisis

Friday, February 6, 2009

Parliament - Government and its social partners are considering various interventions which can help minimise the impact of the global economic crisis on the country.

Delivering his first State of the Nation Address on Friday, President Kgalema Motlanthe said the global financial crisis posed a serious danger to South Africa's economy which is strongly integrated into the world economy.

He reported that interactions between the Presidency and leaders of various social partners, have agreed jointly to devise interventions that would minimise the impact of this crisis.

"Firstly, government will continue with its public investment projects, the value of which had increased to R690-billion for the next three years. In this regard, where necessary, we will find creative ways to raise funds," he said.

This would include support by South Africa's development finance institutions and loan finance from international agencies, as well as partnership with the private sector and utilisation of resources controlled by workers such as pension funds.

"With the economic crisis, lower demand has precipitated a scaling down of production; the creation of jobs is negatively affected and in some sectors retrenchment has become a reality. These difficulties have coincided with a period in which inflation and interest rates are still too high," said the President.

He said combined, these developments bode ill for South Africa's revenues.

"We need to expand the provision of services and to implement our infrastructure projects. As such, countries and South Africa have been forced to tone down our forecasts in terms of growth and job-creation."

To address this, the president said government's central and immediate task would also include fully appreciating the consequences of these developments on the economy and the region, and devise responses that will minimise their impact especially on the most vulnerable sectors of our society.

"Secondly, we will intensify public sector employment programmes. On the one hand, plans to expand employment in sectors such as health, social work, education and law-enforcement agencies will continue. On the other, we will speed up the introduction of the next phase of the Expanded Public Works Programme."

Thirdly, mitigating actions can be undertaken within the private sector to counteract an excessive investment slowdown and unnecessary closures of production lines or plants.

For its part, government would adapt industrial financing and incentive instruments to help deal with challenges in various sectors, and also encourage development finance institutions to assist firms in distress because of the crisis.

Other alternatives are also to be explored, the President highlighted, including longer holidays, extended training, short time and job-sharing. This would be combined with promoting the Proudly South Africa campaign and stronger action on illegal imports.

Fourthly, government would sustain and expand social spending, including progressively extending access to the child support grant to children of 18 and reducing the age of eligibility for old age pension to 60 years for men.

In addition, the President told the National Assembly that government will more widely utilise the Social Relief of Distress Grant and food security measures specifically also to target those either unprotected by the Unemployment Insurance Fund or who have
exhausted their benefits.

"We shall also continue to pay special attention to the challenge of anti-competitive behaviour on the part of some of our corporations. We do hope though that civil society will enhance its own level of activism to ensure, among other things, that as input prices decline, the benefit is felt by the population."

In addition, President Motlanthe said, government would also ensure that the levels of borrowing by government were prudent and sustainable.

This also implies a rapid reduction in government debt levels whenever conditions turn for the better.

The President was optimistic that South Africa would be less severely affected than many other countries, due to the country being transformed through fundamental macroeconomic reforms that had enabled the majority of South Africans to participate in the mainstream economy.

"Indeed, in a period in which others are experiencing or projecting recessions, South Africa and the rest of the continent are still poised for growth, even if at a slower rate."