South Africa needs to accelerate infrastructure development to minimise the impact of the global financial crisis, the World Bank’s chief economist and senior vice-president, Justin Yifu Lin, said on Wednesday.
Developing countries would bear the brunt of the financial crisis, which originated in the United States last year, he said during a public lecture at the University of South Africa in Pretoria.
“We are going to see more poverty. Unemployment will increase and financial stability will be hard to maintain,” he told professors, students and Minister in the Presidency Trevor Manuel.
Referring to the South African experience, Lin was cautious, saying he had only been in the country a short time, and perhaps Manuel, the former finance minister, could elaborate.
Lin said South Africa had been doing “very well” financially before the crisis, due to political stability and its sound and sustainable macroeconomic environment. It had also been recognised as a “shining achievement” and successful example.
“That enviable record is now under the inevitable long shadow being cast by the global crisis.”
Lin expanded on this, saying the current recession borne by the country was the first in 17 years. In order to minimise the impact, the government would need to dig deep into its coffers and invest heavily and wisely in infrastructure development to stimulate an embattled economy.
However, some investment and development had already been in the pipeline.
“Fortunately, even before the onset of the crisis, the South African government had already identified several critical areas of public expenditure.”
These included building Soccer World Cup stadiums, transport improvement initiatives, and service delivery, health and education investments.
Manuel added that trading and manufacturing had been adversely affected and that, while there was a lag between government spending and its effect at the moment, “it [the impact] is likely to become very deep”.
When asked if an open economy between Southern African countries was a possible way to weather the storm, he said: “We have to walk between two fires. On the one side there is a United States of Africa. One the other side there is a retreat into sovereignty which doesn’t really make sense,” he said. — Sapa
PUBLICATION: Mail & Guardian Online
AUTHOR: DENISE WILLIAMS
DATED: 16th July 2009