William Gumede First Published in Pambazuka 3 July 2009
South Africa in the throes of an economic crisis, William Gumede says it's time for the country's government to step up. With the rand's relative strength against the US dollar putting pressure on domestic manufacturing exports, Gumede calls for the Reserve Bank to intervene to weaken the country's currency. President Jacob Zuma must curb price increases, argues Gumede, and offer emergency measures befitting emergency times.
Job losses are increasing, food and fuel prices soaring and house repossessions increasing – yet, depressingly, one does not get a sense that the government is urgently doing anything to avert disaster.
The slower the response to the ballooning economic disaster, the more costly it will be and the longer it will take to undo its effects.
Of course, President Jacob Zuma’s cabinet is still setting up new departments, but South Africa just can’t wait another six to nine months for action on the economic front.
Firstly, we need the equivalent of a war council now to tackle this crisis.
Zuma must invite the best talent in the country – from civil society, business, government and academia – to forge an emergency strategy.
There must be an immediate stimulus – one short-term and the other long-term. The short-term element must be to freeze all home repossessions and call for a 12-month holiday for this in arrears, in which time the loans will be renegotiated.
Secondly, there has to be a big-bang drop in interest rates, rather than incremental decreases.
Thirdly, there has to be an immediate cap on basic food price rises.
It’s good that the Competitions Commission is investigating supermarket chains for possible collusion to keep the price of basic food stuffs high – yet it’s not enough.
The price of petrol increased by between 37 and 40 cents a litre, and the price of illuminating paraffin by an astonishing 62 cents a litre.
The Department of Mineral and Energy affairs says that from 29 May to 25 June the average price of petrol, diesel and illuminating paraffin has risen with the rise of the rand–US dollar exchange rate, which was at 8.1093 compared to 8.4371 during the previous period.
Surely the Reserve Bank should intervene directly to bring down the value of the rand?
To date this year the rand has gained about 20 per cent against the dollar and the euro, which makes it difficult for the struggling manufacturing sector to recover since it makes South Africa’s exports abroad more expensive.
Manufacturing used to contribute up to 22 per cent of GDP (gross domestic product). It’s now down to about 15 per cent and declining.
Those who say we should not directly intervene to weaken the rand because it might raise inflation must have their heads read.
What is the priority here – a small increment in inflation with better economic conditions, or low inflation with massive job losses, home losses, factory closures and fuel price increases with the related social costs?
Zuma must also put a ceiling on price increases by parastatals, municipalities and government agencies, effective immediately, and enforce it at least for the next year.
It is appalling that the National Energy Regulator of South Africa could approve Eskom’s price increase of 31.3 per cent.
Perhaps it’s time for a wage increase freeze at the top end of the public sector management, including for MPs and government ministers.
We are at the beginning of an economic disaster; there have to be drastic emergency measures.
We need firm leadership, Comrade Zuma, and quickly.
This article was originally published by Sowetan.
William Gumede is author of 'Thabo Mbeki and the Battle for the Soul of the ANC'.
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Saturday, August 15, 2009
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