SA economy’s record expansion


9 June 2004

South Africa’s newly appointed Cabinet has got down to work – and analysts say it is clear that a “developmental state” geared towards promoting faster economic growth forms the bedrock of government policy.

Growth is looking positive so far in 2004. The national statistics agency, Statistics South Africa, said the economy grew by 3.1% in the first quarter – more than three times the growth over the same period in 2003.

According to newspaper ThisDay, it is South Africa’s 22nd consecutive quarter of growth – the longest economic expansion since 1960.

This is in line with trends across the continent. The African Development Bank has announced that the continent’s economy grew by 3.7% in 2003, with some African states recording growth rates above 5%.

Economists say the improvement in the economy is partly due to a boom in domestic demand, sparked by a series of steady cuts in interest rates over the last year and R13.3-billion in tax relief last year.

According to ThisDay, the manufacturing, retailing and wholesale sectors have benefited the most. Manufacturing grew 2.7% in the first quarter of the year, while the wholesale and retail trade rose 3.3%. Strong growth was also seen in the hospitality industry (3.3%) and agriculture (2.7%).

Economists say it is likely that the Reserve Bank will remain steady on interest rates for the months ahead, though it may raise them towards the end of the year to offset creeping inflation.

Newly appointed Trade and Industry Minister Mandisi Mpahlwa told a parliamentary media briefing last month that it is important that the state remains engaged in the economy, and that the economic distortions of the past mean that it is impossible for it to remain neutral.

Transport Minister Jeff Radebe told the briefing that the state cannot rely on the market to address the country’s present economic development needs, and will continue to invest in socio-economic infrastructure.

Mpahlwa said it was important for government to limit the rising costs of key economic drivers like transport, energy, water and telecommunications. Structural barriers to growth, such as the railways and ports, would also be addressed, he said.

Mpahlwa added that economic growth was central to black economic empowerment, which in turn would provide the skills needed to grow the economy. reporter