THE Minister of Finance, Trevor Manuel, yesterday assured Parliament that South Africa was not heading into a recession.
His words were: “There is no recession in South Africa.”
A recession is defined by two consecutive quarters of negative growth and Manuel pointed out that the treasury had no information to suggest that this had occurred.
It is good news for this country and it sets us apart from a world where economies are taking a lot of pain.
The US, Europe and Japan are in trouble and this likely to have a knock-on effect in the rest of the world.
And there are problems with how South Africa is geared up to grow its economy.
Manuel put it this way: “It is becoming clear that at least in the medium term, our aspirations for more rapid growth and our capacity do not match.”
He offered a glimpse of a way forward:
“Our dependence on foreign savings can be reduced over the long-term, but the only way to do this sustainably is to export more, to produce goods and services more productively and at lower cost than before and sell them abroad.”
This is the only forward for South Africa. But there are some politically difficult consequences of such a direction.
For one thing, South Africa will have to reduce the cost of doing business by cutting red-tape.
For another it will have to introduce efficiencies in production including reduced regulation and protection for labour, which is not always price-competitive with the rest of the developing world.
South Africa’s Trade and Industry and Public Enterprise ministries have spent too long gazing at their navels.
Perhaps it is time for the Finance Ministry to drive industrial development strategy. Every wasted month, digs us deeper into a hole.