Recession not likely despite weak growth, says Gordhan

SOUTH Africa is not likely to slip into a recession despite the tepid global economy, but the country’s economy is not expected to grow much more than 1.8% by 2018, Finance Minister Pravin Gordhan said.

Gordhan told delegates at the 10th national congress of the National Union of Metalworkers of South Africa in Cape Town that South Africa was entering 2017 amid political, geopolitical and economic uncertainty.

However, he said unless an external shock occurred, a recession would not be likely.

“We don’t expect to go into a second recession. We believe we are recovering as an economy, unless there is some kind of external shock,” he said.

“The exchange rate with the current performance of the currency also means we export cheap.”

Gordhan said many of South Africa’s challenges were informed by the state of the global economy, including the recession of 2008, the slowdown of economic growth in China and the potential effect of the British referendum on EU membership.

“While we need to change the character of growth in South Africa, we have to face the reality that we won’t have the resources to address the various demands if we don’t bring in the growth that we require,” he said.

Gordhan said while South Africa would spend more than R1.5-trillion next year, the country had also borrowed R146-billion.

If South Africa’s economy could not grow more inclusively, the country would have to reduce its borrowing.

“Ratings agencies work for the people who are lending us this money. We need to keep ourselves credible as a creditor around the world that we are able and willing to repay the money we borrow,” he said.

Gordhan made a veiled reference to the issue of state capture, saying that next year the government expected to spend more than R1-trillion on infrastructure, and he urged South Africans to ensure “this money does not end up in someone’s pocket”.

Former Cosatu secretary-general Zwelinzima Vavi told the congress the “predictable and public spat” between SACP general secretary Blade Nzimande and President Jacob Zuma belied the danger of workers’ concerns being neglected by the government and the ANC alliance in favour of factional political battles. — BDLive

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