Greater cooperation needed to restore global growth

Friday, April 3, 2009
By: 
Bathandwa Mbola
Chris Bathembu

Pretoria - Greater cooperation and collaboration is now required by leaders of the G20 to restore global growth, especially on the African continent.

On his return from the G20 Summit to the country on Friday, Finance Minister Trevor Manuel said leaders had demonstrated political will to end the global economic crisis, however, what was needed now was cooperation.

"What we need now is to work together and build the foundation for a sustainable, balanced and inclusive recovery into the future," Minister Manuel told reporters in Pretoria.

He said a "fair amount" had been achieved at the G20 summit and a global response was now needed.

"What the world was looking for was a global response by the G20. We committed ourselves to that and we feel coming out of the meeting, a fair amount has been achieved."

He said the Communique issued by the G20 at the conclusion of the summit provided a road map that requires a global solution to the greatest challenge that faces the world today.

The leaders of the world's most powerful economies have pledged $1.1 trillion to restore credit, economic growth and jobs in the world economy.

"Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale," the leaders said in a Communique issued after the summit.

The Communique also agreed to reform the two international financial institutions - the International Monetary Fund (IMF) and the World Bank to assist developing nations.

The meeting further resolved that the emergency resources account of the IMF, which is the emergency lender for nations in financial crisis, will be expanded to $750 billion.

It further agreed that an additional $250 billion will be given for a new Special Drawing Rights - an international reserve asset used by the IMF to supplement the existing reserves of member countries.

According to the Communique, $100 billion of additional lending will be given to multilateral development banks as well as $250 billion support for trade finance.

Additional resources from IMF gold sales for finance for the poorest countries were also agreed upon by world leaders.

Both IMF and World Bank economists have forecast that the world economy will shrink in 2009 for the first time since World War II.

Mr Manuel emphasised that now that governments had agreed on a plan to restore global growth, it was time for banks to resume lending and enable people to do business.

As the only African country at the summit, Mr Manuel said South Africa presented four points for the Summit's consideration in an attempt to restore global growth and development.

These were: stabilising global finance, countering the global recession, deploying resources to support demand and sustaining investment in developing countries and laying the foundation for a sustainable recovery.

"There were appeals to remember Africa, to make new inroads against poverty, to turn previous aid pledges into reality," he said, adding that there was a commitment to ensure that developing countries received finances particularly in infrastructure.

Mr Manuel said the agreement had also put emphasis on saving jobs and rescuing struggling economies, especially those of poverty-stricken nations.

For South Africa, which has so far avoided a recession, he said the government will not immediately seek loans from the IMF or other world financial institutions, adding that they would only ask for a loan when the need arises.

National Treasury Director General Lesetja Kganyago said South Africa had always been bullish about its economy, but it had never been blind to the fact that the country was linked to the global economy.

"If we hadn't taken the steps we had - painful as they might have been - growth would have been much slower," he said.

Mr Kganyago stressed that while the economy has been affected by the global economic crisis, it remains stable because of massive investments in construction ahead of the 2010 World Cup.

However, Mr Manuel was quick to point out that the mining and automobile sectors would face "enormous difficulties" but this was not unique to local industries.

"These sectors are going to face enormous difficulties. I think the automobile sector is also going to face enormous difficulty, but that wouldn't be a uniquely South African situation."

South Africa's mining and automotive industries have been hard-hit by the global economic slowdown putting thousands of jobs on the line.

The G20 leaders are expected to meet again later this year.