Zuma: 'We have nursed the economy despite turbulence'

Thursday, February 13, 2014

Cape Town – Government aims to create six million work opportunities for young people by 2019, says President Jacob Zuma.

Despite South Africa – part of the emerging economies - feeling the effects of economic uncertainty from the developed countries, Zuma said measures have been put in place to ensure that the economy creates more jobs.

Delivering the State of the Nation Address (SONA) to a packed National Assembly on Thursday night, his last of the current five year term of office, Zuma said despite the fact that the economy has today created over 15 million jobs – the highest ever since 1994, more still needed to be done to create work.

Zuma used the speech to reassure South Africans and foreign investors that despite moments of turbulence, especially in the mining sector in recent times, there was light at the end of the tunnel.  

“Jobs are now being created again. There are now 15 million people with jobs in the country, the highest ever in our history, and over 650 thousand jobs were created last year, according to Stats SA.

“This is still not good enough. “We are taking a number of measures, including the  Employment Tax Incentive Act which encourages employers to hire  younger workers.

“Regulations will be passed to ensure that this does not affect unsubsidized or older workers adversely,” he said.

When former President Nelson Mandela first took over as the first democratic commander-in-chief in 1994, government inherited a nightmare – from declining employment and investment levels, a poorly educated workforce, large monopolies to a declining mining sector, high cost structures and the erosion of the countries manufacturing base.

Due to the maladministration and the unjust rule of the apartheid regime, there were very low domestic savings, significant disinvestment by foreigners and large outflows of capital by South African residents.

The country had low gross fixed capital formation. The fiscal deficit was -8.0% as a share of GDP with total public sector debt was at an alarming 64% of GDP, indicative of a debt trap.

The high budget deficit contributed to high inflation and high nominal interest rates. South Africa’s inflation rate averaged 13.9% between 1980 and 1994 and the central bank rate remained above 15%. Savings were declining, and net foreign direct investment was negative. The country’s per capita growth was also negative.

Low savings, high government consumption expenditure, falling rates of return, capital outflows, stagnating employment, to name a few, presented barriers to growth and investment.

The chickens had come home to roost.

Economy over past 20 years

Shedding light on how the economy had fared over the past 20 years, Zuma said all administrations – under Mandela and the second President Thabo Mbeki, before he took over in 2009 – worked hard and like a healthcare professional, “nursed the economy to recovery”.

“On average, the economy has grown at 3.2 percent a year from 1994 to 2012 despite the global recession which claimed a million jobs. This is still not good enough. The unemployment rate still remains high. Youth unemployment in South Africa continues to be of concern, as it is throughout the world.

He said with the improvement of the economy – and other sectors in government’s five main priorities - South Africa had a good story to tell.

But, Zuma said after taking a sip from his glass of water, more needed to be done to curb the stubborn levels of poverty, inequality and unemployment, especially amongst young people.

“This is still not good enough. The unemployment rate still remains high. Youth unemployment in South Africa continues to be of concern, as it is throughout the world.

“We are taking a number of measures, including the Employment Tax Incentive Act which encourages employers to hire younger workers.

“Regulations will be passed to ensure that this does not affect unsubsidized or older workers adversely.

“Further measures are contained in the National Youth Accord that was signed in Soweto last April.

“The Expanded Public Works Programme and the Community Work Programme continue to be an effective cushion for the poor and the youth,” he said.

The national wealth, measured in terms of GDP, has grown to more than 3.5 trillion rand.

External factors affecting economic growth

Placing the microscope on economic growth, Zuma said it was difficult to ignore external economic factors when diagnosing the performance of the local economy.

Zuma said developments in the United States economy have led to a rapid depreciation in the emerging market currencies, including the Rand.

Last year, the rand fell by 17.6 percent against the US dollar.  

The weaker exchange rate poses a significant risk to inflation and will also make South Africa’s infrastructure programme more expensive, Zuma said.

“However, export companies, particularly in the manufacturing sector, should take advantage of the weaker rand and the stronger global recovery.

“While we have these difficulties, we know that we can cope with this period of turbulence.

“We have done so before in the past five years.

“We will, in fact, emerge stronger if we do the right things.”

Mining sector key driver of economy

Zuma also said the mining sector remains a key job driver of the economy, and said the government intervention in the unrest was needed to bring about stability in the troubled sector.

“We need a mining sector that works. Mining employs over half a million people.

“It is the biggest earner of foreign exchange in our country. It also contributes about 20 billion rand directly to the tax revenue,” he said.

To complement the mining industry, Zuma said the other job-creating sectors that had been identified - tourism, agriculture, the green economy, infrastructure development and manufacturing – would continue to receive investment from the fiscus.

Positive note

On the international level, Zuma said joining the BRIC group of countries – a group of emerging economies similar to South Africa – was a milestone over the past five years.

“It has been an honour for my administration and I to build on the foundation laid by the first three democratic administrations, to serve the people of South Africa.

“As a country we have scored many successes.

“South Africa is a much better place to live in now than it was before 1994.” – SANews.gov.za



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