South Africa's current four percent economic growth rate was insufficient for the country's development needs, Finance Minister Trevor Manuel said on Thursday.

Up from three percent in the past decade, the new rate would still not allow for the doubling of average annual household income in less than 25 years, he told an economic growth seminar of the G20 group of countries in Pretoria.

A four percent growth rate would leave unemployment above 20 percent and hold back efforts to reduce poverty. "The elixir for us would be growth above six percent," Manuel said.

"Our challenge is to raise growth levels to above six percent on a sustainable basis." If this could be achieved, poverty should be halved by 2014 and average household income doubled in 15 years, the minister said.

Reserve Bank governor Tito Mboweni told a media conference on the fringes of the seminar that government efforts to boost the economic growth rate were welcome.

It was initially feared that a growth rate beyond 4.5 percent could yield "balance of payment constraints". But on closer examination one had to differentiate between a closed economy, like South Africa's was for a long time, and one that was now open.

"Once the structural rigidities are removed, we can achieve higher growth without balance of payment constraints or excessive demand crippling the economy," Mboweni said. He would not say what these rigidities were.

Manuel said exogenous factors like international commodity prices had a distorting impact on the attempts of developing countries to boost economic growth.

It impacted on exchange rate stability, which in South Africa's case caused the rand to become the worst performer against the dollar recently, from the best last year.

"These huge oscillations are happening in an environment where we think we are doing the right thing in terms of macro-economic policy," Manuel said.

"We try to do all the right things to have a well-traded and flexible exchange rate. But the level of oscillation makes it exceedingly hard. This does not provide an easy environment for decision making."

These are the type of issues up for discussion at the two-day G20 seminar, co-hosted by the central banks of South Africa, Mexico and China.

The G20 is an informal forum set up as a discussion platform on international economic issues for countries at different stages of economic development.

Its members represent two-thirds of the world population, and economies generating more than 90 percent of world gross domestic product and about 80 percent of world trade.

Apart from the three host countries, the other members are: Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Japan, Korea, Russia, Saudi-Arabia, Turkey, the United Kingdom, the United States and the European Union.

This week's meeting was aimed at exploring policies conducive to sustainable economic growth — particularly for the developing world.

Issues up for discussion include the role of government, the effects of a healthy workforce on economic growth, price stability and financial liberalisation.

A report would be compiled at the conclusion of the seminar, eventually to be tabled before the next G20 finance ministers' meeting in China.

This would then culminate in a G20 accord statement with policies for economic growth, Mboweni said.

Sapa

SA economy South Africa is the economic powerhouse of Africa, with a gross domestic product four times that of its southern African neighbours and comprising 25% of the entire continent's GDP.

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