Johannesburg - Government will pursue a fiscal policy of saving during good times, and spending to stabilise the economy during downturns, Deputy President Cyril Ramaphosa said on Thursday.
“We seek a fiscal policy that gradually shifts spending from consumption towards investment,” he said in a speech prepared for delivery at a SA Reserve Bank leadership conference in Muldersdrift, Gauteng.
He said slower growth in China, South Africa's main trading partner, had reduced prices of many export commodities, and led to a deterioration in trade.
Growth in developed countries had gained momentum while the expansion of emerging markets had slowed, he said.
“The global economy is slowly spluttering to life. Yet, uncertainty remains about the path forward. Growth is uneven and downside risks remain.
“Developing economies remain vulnerable to volatile capital flows.”
Ramaphosa said the key problems for South Africa's economic growth were domestic.
“The economy contracted by 0.6 percent in the first quarter of the year, and barely grew in the second quarter, as mining and manufacturing production fell sharply and growth in other sectors remained modest.
“Supply side disruptions have plagued the domestic economy over the last couple of years, weakening confidence and reducing the level of investment and household consumption.”
He wanted to see a greater role for development finance institutions in supporting investment in infrastructure, agriculture, small business development, black economic empowerment, and industrialisation.
“Banks will be encouraged to broaden access to financial services to enable people to build up their assets and to help small businesses to emerge and grow.
“Measures will be introduced to address poor lending practices and excessive charges in some parts of the financial sector, and make the financial sector more inclusive and accessible.”
Ramaphosa said government would strengthen the regulation of financial institutions to ensure savings were protected.
The Postbank would play an expanded role in the banking services.
“We need to work together to ensure the financial sector serves the real economy,” he said.
“We hope that you will work with government in solving many of the complex economic policies that our country confronts.” - Sapa