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29 January 2009

Excellencies,
Distinguished guests
Ladies and gentlemen

We are gathered here in Davos against the backdrop of a very gloomy global economic outlook. The scale of the financial crisis is without precedence, as the International Monetary Fund (IMF) projects the worst prospects for 60 years and the International Labour Organisation projects 50-million job losses globally. Countries around the world are seized with this crisis and are working on various mechanisms to help their economies to weather the storm.

While it is important to look at solutions to lift us out of this environment, it is equally important to understand exactly how the world economy was brought to its knees and by whom. In an integrated world, such as the one we live in today, our obligation as governments and corporations to conduct our affairs in a responsible manner is all the more important. Greed, self interest and recklessness cannot and should not be tolerated for reasons we now very well understand.

All countries will be affected negatively by the crisis, obviously to different degrees. South Africa has been impacted in a number of ways. Though our banking system escaped turmoil internally, their global operating environment has been all but decimated with very little capital available for investment. Close to 60% of our exports were destined for the United States (US), European Union (EU) and Japan and the contraction of demand in those economies is going to have a direct impact on our manufacturers and the labour they employ. The decline in commodity demand and prices also has a negative impact on those sectors in South Africa.

Having said this, we are optimistic about our ability to ride out the tough period ahead. It will not be easy, let's not be naive; however as South Africans, we have come through more difficult times. Just to contextualise, you may recall the state of the South African economy we inherited in 1994. It was an economy in decline, with high debt and high unemployment. It was an isolated state with few diplomatic and trading partners in the world. The largest contribution to gross domestic product (GDP) came from the extraction industries with little or no manufacturing footprint to speak of. The social condition of the country was in absolute dire straits as a consequence of apartheid policies.

Today, South Africa is an integrated and responsible member of the global community. South Africa enjoys preferential market access into traditional markets like the EU and US, but also into emerging new poles of demand like India and China. We transformed the economy through fundamental macroeconomic reforms and created the enabling environment for the majority of South Africans to participate in the mainstream economy.

Today, we are debt free and over 70% of GDP is now derived from manufacturing and services. Direct mining now contributes around six percent to GDP. We have created three million new jobs since 2004. Of course, we have a long way to go still in the area of unemployment. The position we have today has been achieved through sound fiscal management, consistent and coherent policy formulation and implementation. Similarly, this approach will ensure that we emerge from this global economic crisis. We must, however, absorb the lessons from this experience in two ways. The first is in the global context and the second is a domestic imperative.

In the global context, it will be critical for the world community to get together and agree on new and higher standards of global governance, particularly in the financial arena. We need more transparency and accountability especially due to the deeply integrated nature of the world economy today. We also need to ensure that all nations are involved in this process as the time has passed where a few nations can dictate to the many. Global governance needs to be democratised. Further, it would be a mistake to retreat and become protectionist. The developing world is our best chance for recovery and in this regard the terms of engagement between the developed and developing world needs to be revisited.

The Doha development round of talks should be prioritised for conclusion on terms that are just, equitable and development oriented. It is certainly in the global good to do so. I am certain that the world economy will not be same again – even after recovery. There will be a new order and we hope that this development is embraced constructively by the developed world.

Domestically speaking, South Africa is in a difficult but very different position to other emerging economies. We envisage a strong public sector investment in infrastructure projects valued around $69 billion in transport, construction, roads, ports, energy and ICT over three years to be a major stimulus to growth and development. This will be funded from the state and does not depend on borrowing. The large investment into the FIFA 2010 World Cup for stadia and related infrastructure is also on track and not dependent on borrowing.

We have also encouraged our Development Finance Institutions to use their very healthy balance sheets to invest in projects where traditional credit is no longer available. We are working with the manufacturing sector to develop programs to assist them on a sustainable basis. We recently introduced a support programme for the ailing automotive sector.

Though growth figures have to be revised, we are confident that we could realise four percent growth if we implement our programmes of actions properly. South Africa remains a global leader in the resources sector and our industrial policy will seek to enhance beneficiation. Special emphasis is being placed on labour intensive sectors and in diversifying competition. We are prioritising those sectors that will maximise the multiplier effect on downstream industries.

Now is a very good time to position and prepare for the upswing. The African continent has been the least affected by the global financial crisis. The new global economic order must see Africa at the centre and not on the periphery. As the richest continent on the planet in terms of resources, it is an economic and social imperative that Africa be an integral player in turning the global fortunes around.

The mood in Davos is rightfully sombre, however, we are gathered here tonight to celebrate South Africa and the first ever FIFA World Cup to be hosted on African soil. Our preparations for this seminal event are on track, and already shows to be FIFA's most profitable World Cup ever. This is certainly something to celebrate. We are here to tell the world that South Africa is ready. We will present to the world the best World Cup ever.

I thank you.

Issued by: The Presidency
29 January 2009
Source: The Presidency (http://www.thepresidency.gov.za)