Posted on January 31, 2012
"South Africans should not worry too much about the outlook, but ask what they should do," he told a conference hosted by the Gordon Institute of Business Science and Business Day in Johannesburg via a video link from Davos-Klosters. "Can we have a conversation in SA? ... What can we do in these circumstances? What are our strengths? Being part of Africa is a huge strength; how can we grow on that?"
Mr Gordhan said the lesson from Europe was that societies with dynamic politicians and political systems; high levels of cohesion between the government, broader society, business and labour; and those able to discuss their problems frankly, were the ones that could make big strides. He advised South Africans not to dismiss out of hand new approaches to growing the economy.
"If South Africans were going to be formulaic and scoff at everything the African National Congress suggested, they might be missing an opportunity to find different pathways to the answers the world was looking for," he said. "What the crisis is actually saying is, even the economics profession is in crisis; forecasting is not always right."
Mr Gordhan's comments came after the International Monetary Fund (IMF) this week revised its forecast for domestic growth this year, down to 2,5% from 3,6%.
The new estimate was a touch lower than the market consensus and reflects the prevailing view that the main challenge for SA this year is weathering the effects of the sovereign debt crisis in Europe, its main trade partner. The IMF pointed out that SA was the African country that would be most affected by the global slowdown, which it also predicted would be worse than anticipated late last year. In fact, the domestic economy is not doing too badly, although it is not holding up as well as its emerging-market peers.
"Part of the reason we think we're doing badly is that we compare ourselves to developing economies," Econometrix economist Azar Jammine told the conference. "I think the coming year will be tough but not disastrous."
In its updated World Economic Outlock, the IMF said that growth in emerging and developing economies was set to average 5,75% this year, a significant slowdown from the 6,75% growth rate in 2010 and last year. It also revised its global growth forecast for this year down to 3,25%, from 4% in September. The main reason for the revision was 'that the euro zone was expected to enter a mild recession due to the sovereign debt crisis, bank deleveraging and the effects of fiscal consolidation, the IMF said. Global markets have swung back and forth in response to twists in the debt saga.
Jitters worsened yesterday after a senior member of the German government rejected suggestions that the European Central Bank take losses on its Greek debt holdings, backing the bank in a dispute with the IMF.
"Economic sentiment is worse then economic performance," said Gavin Keeton, an associate professor at Rhodes University. "People think we're sitting on an iceberg with the Titanic coming our way ... and that Europe will drag us into the abyss," he told the conference.
Official figures show exports are falling, led by a slowdown in the flow of goods to Europe. During the first two months of last year, the cumulative trade deficit reached R21,3bn, comparing poorly with a R5,3bn shortfall the previous year. But exports account for only a fifth of gross domestic product, making SA heavily reliant on local consumption. That will remain the case, and rising inflation, uncertainty over employment and high levels of household debt are expected to curb consumption this year.
Investment Solutions chief strategist Chris Hart said this year could prove to be a "watershed" in terms of policy — fiscal, monetary and political. The national budget next month would be one of the most "critical" since 1994, he said. In the absence of any policy changes, he believes the economy will continue to grow at an annual rate of 3%.
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