SIKI MGABADELI: We are speaking now to the Minister of Finance, Pravin Gordhan. He is in Davos at the World Economic Forum annual meeting. We are asking the question as to what our message as South Africa is at a time when our economy is under some serious pressure. You would have heard in the news that the IMF has cut the economic outlook for South Africa by almost half to less than 1% for 2016.
That three-day World Economic Forum meeting is taking place loosely around the theme of the Fourth Industrial Revolution while leaders are expected to also discuss worldwide crises such as the oil glut and a Chinese economic slowdown.
So let’s speak to Finance Minister Pravin Gordhan now. Minister, thanks for your time this evening. Let’s maybe start with your reaction to the IMF cutting our economic growth forecast to 0.7% for this year.
PRAVIN GORDHAN: Good evening, Siki, and good evening to your listeners. Well, that’s part of the trend that the global and emerging market economies, in particular, but others as well, have been following for some time, where the IMF has, in the face of very difficult circumstances, been forced to consistently lower its forecast. But remember these are forecasts.
And the response is clearly we take note of it. Secondly, we might have slightly different numbers, because of our own modelling. And thirdly, the issue is not really how bad things are but how we can make it better.
And it’s in this regard that the Davos delegation met last Friday with the chairperson, the president, including large numbers of business people and the government’s representatives. And our message, as you were indicating in your introductory remark, is clearly that South Africa has a lot going for it. Its business infrastructure is world-class, we are on top of the competiveness index in many respects, the stock exchange, our financial system, our legal system – and of course we are at the bottom of the index in other respects as well that we need to tackle.
So in a very tough situation like this we have to tighten our belts, make sure that we moderate what we intend to do on the one hand, and on the other hand work with labour, business and ourselves to find some creative answers to the question of growth and investment in South Africa.
SIKI MGABADELI: And will that still be premised on the National Development Plan, because since its development it has really been the blueprint that the South African delegation presents at Davos, to say: This is how we want to structure our society, these are our goals, our targets; this is what we want to do. But one gets the sense that it’s almost an international message and there is very little local implementation.
PRAVIN GORDHAN: No, no, there is. If you remember, for some years now in the budget documentation you will find references to the NDP and how concrete programmes within government are being funded at the moment. So the NDP is not really put on the shelf only. I think we need to focus our minds better and we need to ask ourselves some tough questions about our weaknesses on the implementation front. But above all we’ve got to create a better level of trust and confidence among the business sector, which controls a large part of our economy. And on the government side we need to look harder at what we can do to facilitate the investment.
SIKI MGABADELI: Ahead of the Davos gathering of course you met up as government with the business leaders – you mentioned it is all about consensus building. Is labour part of those conversations, because as you said, it needs to be all the role players participating?
PRAVIN GORDHAN: The Davos delegation doesn’t have too many, if any, labour representatives. But there are other initiatives that government will be taking, which the President will address in the State of the Nation address to ensure that we work as one Team South Africa.
And it’s quite important for us to realise that the environment globally is reflected in those IMF numbers. Secondly the attitude and approach to emerging markets, which vacillated quite a lot in the post-2009 period – it’s emerging markets, the big ones in particular, that spend billions if not trillions of dollars as a total in providing stimulus to their economies to make sure that global growth doesn’t reach proportions where we would have a global depression.
And now developed countries are picking up growth in some instances. Others are still modestly above zero and emerging markets find themselves in difficulty because of the commodity situation and other pressures that they face.
But we’ll come out of it. These things don’t last forever. So we’ve got to prepare for better times, batten down the hatches and work as a team.
SIKI MGABADELI: I mentioned that the theme for this year at the Davos meeting is around the Fourth Industrial Revolution, speaking to how we are confronting a more complex and incredibly interconnected world. How are we as South Africa doing that, minister?
PRAVIN GORDHAN: We are the most sophisticated industrial nation on the African continent. We mustn’t forget that, despite our difficulties and the exclusion of large numbers of people from our economy, even 21 years after democracy. It’s another issue that we’ve got to deal with as South Africans.
Secondly, there are investment flows that are taking place which the DTI manages and interacts with, and … jobs are being created. What we need to do is to increase the scale.
And thirdly and far more importantly is to get a deeper commitment to research and development and in particular innovation in creating products that the world and in particular Africa requires as well. There is a downside to some of the technological emphases in the so-called Fourth Revolution because many developed countries are seeing structural unemployment – in other words they have unemployable people, they have a situation where robots and machines and computers are running production systems as opposed to people. In the next 10/20 years, as some of the global economic journals have been pointing out, we could have serious difficulties in providing wages as a livelihood for the majority of our people.
But I imagine these are the pros and cons that will be discussed at Davos in the midst of looking at the current crisis and finding new answers to the challenge of inclusive growth.
SIKI MGABADELI: All right, we’ll leave it there. Thanks for your time today, Minister Pravin Gordhan.