Business

SA to ride World Cup 'tailwind': OECD

21 July 2010

Successfully hosting the 2010 Fifa World Cup has earned South Africa "a lot of respect" and "will bring business opportunities and hopefully will open markets," says the Organization for Co-Operation and Development (OECD).

Speaking at the release of the OECD's first economic survey of South in Pretoria on Monday, OECD secretary-general Angel Gurria said South African Finance Minister Pravin Gordhan "has recently confirmed the positive impact which comes from infrastructure construction and the visitors attending the championships."

He said this "tailwind" should be used for reforms which would broaden the opportunities for South Africans to improve their living standards.

"These reforms need to tackle two things – increasing employment and improving export performance."

Gurria added that when the global economic crisis hit South Africa, the country had had room for fiscal stimulus, having reduced its public debt burden over the previous decade.

"South Africa is not threatened by the sort of sovereign debt crisis that has affected more heavily indebted economies," Gurria said, adding that the country's economic growth had resumed in the third quarter of 2009 and had strengthened in the next two quarters.

"By next year, annual growth could move above trend, which we estimate to be around 4.0 percent."

Gordhan, however, told the briefing that the growth rate required to reduce unemployment in South Africa was over 6 percent.

"But even that is inadequate to absorb South Africa's unemployment," the minister said. "What we really need is 7 percent growth for 20 years to have a significant impact on poverty and job creation."

The OECD recommended that South Africa do more to increase its foreign currency reserves and weaken the rand to aid economic growth.

Gordhan told the briefing that the South African Reserve Bank would build its foreign exchange reserves "to the extent that it's possible and affordable".

He added that South Africa wanted a more competitive and stable exchange rate.

"The Reserve Bank now has a more flexible mandate and is required to take into account employment, asset bubbles and economic growth when it sets interest rates," he said.

Gordhan assured the OECD that he would take its recommendations into account. He added that in the future, he looked forward to working with both labour and business in the country.

Sapa