Cape Town - The South African economy has continued to grow at a moderate pace despite weak global growth and domestic constraints, Finance Minister Pravin Gordhan said on Wednesday.
In his 2013 Medium-Term Budget Policy Statement (MTBPS), tabled in Parliament, he said GDP growth - projected at 2.1 percent in the current year - was expected to rise to 3.5 percent in 2016.
On this growth trajectory, employment was projected to expand by about 1.7 percent a year - much lower than was necessary to reduce joblessness and bring millions of South Africans into the productive economy.
A rapid expansion of employment required a fast-growing economy capable of absorbing more labour. The National Development Plan (NDP) provided a framework for improved co-operation between government, business, labour and civil society to address pressing concerns and embark on long-term reforms, he said.
After five years of financial and economic instability, world economic growth prospects remained subdued.
While the National Treasury expected a gradual recovery in trade and development prospects, South Africa could not rely on the global economy to be the main driver of domestic growth and development.
Achieving sustainable growth and job creation was largely about structural reforms to improve education and productivity, increase product market competition and competitiveness of local firms, raise the level of savings and investment, enhance the role of black economic empowerment initiatives to broaden participation, and strengthen the efficiency of state-owned enterprises.
“Government remains committed to macro-economic stability, supported by prudent fiscal management, inflation targeting and a flexible exchange rate.
“These policies ensure that the country's finances remain sustainable; that South Africa can attract domestic and international investment; that wages, social security benefits and savings are not eroded by high inflation; and that the economy can absorb external shocks.”
Labour disputes, electricity shortages and other supply-side disruptions had weighed down business and consumer confidence, and lowered demand for goods and services.
Effective resolution of these problems would boost confidence and economic performance.
On factors supporting an improved economic outlook, he said that, over the medium-term, improving global conditions and strong regional growth would support moderately higher demand for South African exports.
Continued investment in infrastructure would reduce supply constraints, help to crowd-in private investment, and allow for more production and employment.
The rand's weaker real effective exchange rate was expected to support the profitability of mining and competitiveness in the manufacturing sector, provided that domestic cost pressures remained moderate.
China's transition from investment-led growth, with a larger role for household consumption, should open up new opportunities for competitively priced, locally-manufactured exports.