South Africa’s economic growth

news: South Africa’s economic growth

PORTUGUESE BUSINESS should be ready to invest in South Africa now that its economy is booming and its political climate is stable, argued South African Deputy Trade and Industry Minister, Benedicta Hendricks, in Lisbon recently.

Hendricks was in Portugal for talks with her Portuguese counterparts, to address the Portuguese-South African Chamber of Commerce and to help celebrate Africa Day.

South African Ambassador to Portugal, Elsa Dry, also addressed the audience saying: “There should be an acceleration in the trade relations between South Africa and Portugal as there is so much potential.”

Hendricks said that the business confidence index in South Africa’s private sector had reached the highest levels since the 1980s because of the changes that the South African economy had effected over the past 11 years and the prospects of higher growth. “Those of you who had business dealings with South Africa prior to 1994 will recall that there were very real economic problems at the time. This included declining economic growth, a closed economy and a currency subject to numerous controls, high tariffs, and high levels of political and labour unrest.

“The economy at that time was also very dependent on the resources sector. There were a number of impediments to achieving growth. From 1996, the government started putting in place mechanisms to address these problems. At the macro-economic level the government implemented policies to achieve low inflation, low budgets, reduce foreign debt and reduce the budget deficit.”

This has resulted in macro-economic stability in South Africa, which has enabled the country to invest in the economy. At the micro-economic level, South Africa needed to increase its manufacturing base and develop industry. Consequently, over the past few years, the country has been developing and supporting industrial growth, attracting new investment by offering attractive incentives to investors, providing tax rebates and establishing industry development programmes.

South Africa has also been fostering small businesses, promoting greater equality through broad based black economic employment programmes as well as building a more efficient business environment.

The South African government’s strategy to support economic growth has resulted in co-ordination in cross-government departments, so that they are able to effectively address input sectors such as road and rail infrastructure, telecoms, port modernisation, access to cheap and efficient sources of energy and an excellent logistics framework.

Hendricks also talked about the 2010 World Cup in South Africa and the successful private banking sector.

The forecast for economic growth is five per cent, next year it is expected to be four per cent and the aim is to push growth rates to six per cent. Key sectors that need supporting have been identified, particularly in the export area such as the automotive industry.

“We are currently enjoying the longest period of sustained economic growth in 50 years. International rating agencies like Standard and Poors and Moodys have upgraded South Africa from BAA3 to BAA2 and BBB stable to BBB+,” she said. Also, organisations such as the World Bank and the World Economic Forum have given South Africa positive response in recent reports.

“We have been addressing our apartheid legacy, which excluded black people from participating in the economic mainstream. We have initiated a programme called Broad Based Black Economic Empowerment Strategy to encourage and promote black participation in the economy.

“Our black economic empowerment policies will not result in a change in our commitment to investors,” she said. Rather, it would help foster substantial growth in South Africa, which would increase the levels of internal demand and, in turn, attract investors. New financial mechanisms have been introduced in South Africa to improve the access to finance by black owned firms.

She talked about new bilateral and multilateral trade agreements, while economic and trade relationships with the rest of Africa have also dramatically improved, creating new business opportunities. South Africa is seen as a business gateway for the rest of Africa.

The minister concluded by saying: “South African economy is growing in a politically stable country, with a government committed to sound economic policies and fostering a favourable business environment.”