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Economists back Zuma's strategy

By Lihle Mtshali | Jun 04, 2009 | COMMENTS [ 0 ]

PRESIDENT Jacob Zuma's inaugural state of the nation address has been met with positive reaction from economists.

Zuma promised, among other things, 500000 jobs by the end of this year, 4million jobs by 2014 - and that the cost of telecommunications would be reduced.

In his speech yesterday, Zuma focussed on strategies that would keep the local economy working, despite the harsh reality of an economic downturn.

"We will also ensure that government buys more goods and services locally, without undermining our global competitiveness or pushing up costs beyond acceptable levels."

While economists welcomed this as a noble cause, they questioned how it would all be achieved, if at all.

Efficient Group economist Fanie Joubert said the government was already contributing as much as it could to the country's gross domestic product.

"If you look at latest GDP data, the state's contribution to GDP grew by 4,1percent. At this stage the state is doing as much as it can.

"In reality, how much more can the state do? Due to the economic slowdown there's a limit from a financial point view to what government can do."

Kevin Lings, an economist with Stanlib, said the plan would be beneficial for the economy but it would have to be monitored.

"It's easy to say in theory, but hard to achieve in practice.

"Obviously it's a very helpful thing for the county if we support local goods and services. There's nothing fundamentally wrong with this, as long as we make sure that we don't directly increase protection by raising import duties - and as long as it does not lead to other uncompetitive behaviour."

Lings said that given South Africa was a member of the World Trade Organisation, it would have to continue complying to world trade rules, which it had always done in the past.

"Uncompetitive behaviour would arise from supporting or purchasing goods and services that are more expensive or substandard, simply because you want to support local industry. There could be dire consequences to that," he warned.


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