South Africa’s recovery from its first recession in 17 years remains fragile and uneven, and structural changes are needed to place the economy on a sustainable growth path, Trade Minister Rob Davies said.
The global financial crisis showed that South Africa “was not as resilient to exogenous shocks as a number of other key developing countries,” Davies said in an address to Parliament in Cape Town today. “Real risks remain for the South African economy in a context where there is still no guarantee against a double-dip recession in the world economy.”
Africa’s largest economy returned to growth in the second quarter of last year after three consecutive quarters of contraction. Even so, 870,000 jobs were lost last year and a further 171,000 were shed in the first three months of 2010. The 25.2 percent unemployment rate is the highest of 62 countries tracked by Bloomberg.
“South Africa’s recent growth was driven to too great an extent by unsustainable growth in consumption, fuelled by credit extension,” Davies said. There was insufficient “growth in the production side of the economy. We must become more competitive in domestic and export markets.”
The government aims to attract 115 billion rand ($15.3 billion) in foreign direct investment over the next three years, as it implements a new industrial policy, Davies said. India, China, Brazil and the Middle East are being targeted for capital.
Davies also announced that South Africa would push for the adoption of a free trade agreement between three African trading blocs -- the Southern African Development Community, the East African Community and the Common Market for East and Southern Africa.
“Once established, this would bring into existence an FTA literally from Cape to Cairo, with 700 million people,” he said.