South Africa’s economy is still feeling the effects of its first recession in 17 years and needs to be placed on a new trajectory to slash the 25.7 percent unemployment rate, Finance Minister Pravin Gordhan said.
Africa’s largest economy shed about 1 million jobs because of the recession, which began in the final quarter of 2008 and lasted until the second quarter of 2009. The economy expanded an annualized rate of 1.3 percent in the second quarter of this year, its slowest pace in almost two years, after growing at a revised 4.5 percent rate in the prior three months, the government’s statistics agency said in a report released yesterday.
The latest growth data were “disappointing to say the least,” Gordhan said in a speech at the University of Cape Town yesterday. “We need to create a dispensation where our economy has the capacity to absorb both skilled labor and unskilled labor, and we are not at that point at this stage. Hopefully we can still get to beyond 3 percent” growth this year.
Growth is lagging behind the government’s targeted annual expansion of 7 percent that it says is needed to meet a pledge to create 5 million jobs in the next decade and cut the jobless rate to 14 percent. It may take three years to regain the jobs lost in the recession, he said.
“It is now well-established that looking at a GDP number is not enough,” Gordhan said. “Unless we talk about social justice accompanying the GDP number, we are not going to get the right balance in this society.”
Won’t Copy Australia
The minister called for “a new formula” to be developed to bring more of the black majority into the mainstream economy, saying the current dispensation is not working and only serves to benefit a small elite.
While South Africa is constantly reviewing its tax laws, it currently has no intention of emulating Australia’s plans to increase taxes on mining companies, Gordhan said.
South Africa, where companies including Anglo American Plc, BHP Billiton Ltd. and AngloGold Ashanti Ltd. have operations, is the world’s largest platinum and chrome producer and Africa’s biggest gold producer.
The mining industry is important, Gordhan said. “Clearly it’s not playing as full a role as it should be playing, both in terms of exports of minerals and also in terms of mineral” processing, and more needs to be done to encourage investment in the industry.
The rand strengthened 0.4 percent to 7.0568 per dollar at 7:21 a.m. in Johannesburg.