Cape Town – While South Africa is being flooded with ideas about how to handle the global financial crisis, finance minister Trevor Manuel sent a message to the nation yesterday that current fiscal and monetary policies are correct, and indeed have been protecting the nation against the ‘biggest crisis since 1929’.
His key messages were that South Africans needed to become even more productive. They needed to save more and export more competitively, while the state needed to ensure borrowing was limited.
Speaking in the national assembly, Manuel said there was no shortage of good and bad ideas. ‘Our task is to find the good ones and move forward with policy articulation and implementation. Raising the cost of economic activity and restricting our ability to trade is not the right path for South Africa. We live in a world where our … domestic auto or metals industries are intimately and irrevocably linked to the rest of the world.’
Manuel said the ‘indiscriminate dispensing of cash’ to firms that lobby for help would not raise incomes and create jobs. ‘We have made financing available for industrial policy – it is time that economically sensible plans are articulated for public review and support.’
He said current policies had been appropriate to South Africa’s macroeconomic challenges in recent years. ‘We have set a monetary framework that targets a low and stable rate of inflation over the long term.’ As a small economy, he said, ‘we can expect that inflation will sometimes fall outside the target. We are not alone in this.’
He said South Africa had experienced ‘at least part of the financial shock’. This included a sharp depreciation in the rand exchange rate and the plunging prices of equities and bonds.
Earlier in the day, Manuel had told members of the finance portfolio committee that his office had been inundated with requests from countries that wanted to study the national credit legislation.
While local household debt levels were not nearly as bad as in the UK and the US, he was concerned about conspicuous consumption, which led people to purchase, for instance, a R1 million car ‘to be somebody’.
He said the Germans had the right attitude: they had learnt from the crisis of the 1930s to save in order to spend. He suggested that perhaps the Chinese had gone overboard with the principle of ‘save to save’. – Business Report
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