Linda Ensor
10 October 2008
Cape Town — The slowdown of economic growth in developed countries was likely to reduce demand for SA's mineral exports and reduce export earnings, Finance Minister Trevor Manuel told the cabinet this week.
Manuel made a presentation to the cabinet on the global financial turmoil and its likely impact on the domestic economy. He also gave a briefing on the medium-term budget policy statement which will be tabled in Parliament on October 21.
Premiers and finance MECs joined the meeting to hear what fiscal plans the t reasury had to deal with the cur-rent economic cycle and with the demands emerging from the African National Congress's (ANC's) national conference at Polokwane last year.
Government spokesman Themba Maseko said at a post-cabinet briefing that Manuel would make a full statement on the effects of the crisis on growth projections only when he spoke in Parliament.
The 2008- 09 budget forecast a growth in gross domestic product of 4% this year, inflation of 7,1% and a budget surplus of 0,8% but things have changed so dramatically since Febru-ary, when the budget was tabled, that significant revisions are expected.
The cabinet approved the framework for the division of revenue for next year's medium-term expenditure framework.
Manuel told the cabinet that a slowdown in growth of developed countries would result in a "major decline" of exports of South African minerals - particularly platinum - which would hit the mining industry hard.
It would also mean lower export earnings.
Manuel noted that the economy had shown signs of resilience but he could not give the assurance that it would not feel the effects of the global slowdown.
He told the cabinet that the regulation of the banking sector in SA, and foreign exchange controls, had protected local banks from the financial turmoil that had swept the US and Europe and helped it avoid some of the traps into which international banks had fallen.
The malaise of foreign banks would make it more difficult for Eskom to raise foreign finance for its R343bn infrastructure development programme and it might have to source funds locally or delay parts of it.
Maseko said President Kgalema Motlanthe had not yet decided whether to retain the position of deputy finance minister after the resignation of Jabu Moleketi.
Manuel had taken over Moleketi's role of co-ordinating government initiatives for the 2010 Soccer World Cup.
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