#SONAdebate / Johannesburg - President Jacob Zuma has said South Africa will focus on correcting domestic circumstances that have affected confidence in the economy as it has little influence on the global economic outlook.
Zuma told Parliament yesterday that low commodity and oil prices had placed the balance sheets of commodity-exporting countries, such as South Africa, under strain.
Read: Preventing downgrade a priority, says Zuma
Responding to the debate on his State of the National Address (SONA), Zuma said the cabinet had spent time discussing means to reignite the country’s stagnant economy. “In this regard, stronger measures to restore a sustainable fiscal path have been endorsed at the highest level of government,” he said.
Business
Zuma had come under attack from the opposition who said his Sona underscored his disregard for the economy and job creation. He said the government had solicited support from business as a key stakeholder on the path to kick-starting the economy, and had met four times since last month.
The president said business had established three working streams to look at the prospect of the sovereign downgrade, identifying areas for co-investment and small-, medium- and micro-sized enterprises, or SMMEs, development.
“High up on our agenda is to prevent a sovereign downgrade. A downgrade would have an adverse effect for all South Africans.”
Zuma said other issues raised at the meetings with business were the need to improve labour relations and create an environment for youth employment, collaboration on fighting corruption and the need to strengthen institutions.
He also weighed in on the impact of the drought, charging that it had put the agricultural sector under severe strain. He said the affects of the drought would be felt for a long time to come.
“It will be felt through food price increases and increases in feed grain. It will also cause rising debt levels for farmers and job losses for farmworkers. Farmers are facing a serious challenge of dying livestock due to the drought.”
About 7 million households were affected by the drought disaster, the president added.
Ratings agency Moody’s said on Tuesday that South Africa’s drought could tip its already weak economy into recession as rising agricultural imports fed into rising inflation. Moody’s said for the time being, the government had refrained from declaring a state of emergency – a move that would have triggered additional allocations from the national Budget.
The ratings agency added that the drought would stretch South Africa’s already wide trade and current account deficits above the target of less than 4 percent through maize imports.
Drought relief
Zuma said government departments were providing support to farmers and had invested more than R450 million for drought relief.
“The funds have been spent on water tankers, borehole drilling and rehabilitation, as well as the improvement of dysfunctional infrastructure. In addition, a total of R498 million has been approved nationally in addition to R124m allocated by provinces, to assist affected farmers with livestock feeds and water.”
Zuma said South Africa had proven to be a resilient economy due to the solid fundamentals that had been laid since the advent of democracy.
“The country’s prudent fiscal management and sound monetary policies support macro-economic stability and promote effectiveness. It is for this reason that we say South Africa’s positive attributes far outweigh the challenges. And these challenges are being addressed through dedicated programmes and plans.”
BUSINESS REPORT