An extract from Trevor Manuel’s Budget speech which points to how the global financial crisis could expand into a “second Great Depression”.
The consequences are felt everywhere. If the balance sheet of a bank shrinks, its
capacity to lend is eroded. If its lending is curtailed, businesses and households have
to reduce their spending. If demand falls in Birmingham, factories close in Beijing. If
production lines in China slow, demand for commodities from Africa dries up. The
vegetable shop next to the mine closes, and the drivers of the delivery vehicles are
asked to work short time, on half pay, and if the driver cannot pay his mortgage, the
bank forecloses on his bond, and the bank writes down its balance sheet again…
When a global motor company cuts back on making cars, it cancels its orders for
catalytic converters. Madam Speaker, this firm making catalytic converters is not in
Detroit or in Shanghai, it is here in the Eastern Cape. The mine producing the platinum
that goes into that converter is near Rustenburg. The worker in the factory in Uitenhage
and the mineworker in Rustenburg are now without work. And the woman who runs the
little stall selling vegetables outside the mine is making less money each passing week.
And their families, all of them, face a future made more precarious by the vagaries of
2009 Budget speech
In a very short period, Madam Speaker, what started off as a financial crisis may well
become a second great depression. Last year, 2.6 million US workers lost their jobs.
This year, twenty million migrant workers who went home for the Chinese New Year will
not return to the cities, because those jobs have disappeared.
In the past ten months, the International Monetary Fund has revised its forecast for
global growth in 2009 downwards no less than five times, from 3.8 per cent in April last
year to its current estimate of just half a per cent. Initially the downgrades were focused
on developed countries, but projections for GDP growth in emerging markets have now
halved from 6.6 per cent in April to 3.3 per cent currently.
The United States has been in recession since the last quarter of 2007 and its economy
is expected to contract by 1.6 per cent in 2009. The official interest rate has been cut to
almost zero. Growth in Europe has slowed to 1 per cent in 2008 and is forecast to
contract by 2 per cent in 2009. The UK economy is expected to shrink by 2.8 per cent in
China’s GDP growth fell to 6.8 per cent in the final quarter of 2008 and will slow this
year to its lowest level since 1990. India’s growth will fall by almost half.
Sub-Saharan Africa is feeling the effects of the commodity price plunge and declining
investor confidence. Projected growth slows to 3.5 per cent in 2009 from 5.4 per cent in
Trevor baba you should have cut us some slack on alcohol and cigarretes. Otherwise I’m satified. Job well done