Thursday, June 11, 2009

Zuma Plans For South African Recovery

Zuma plans for recovery

Thu, 11 Jun 2009 07:51

African governments should be planning for the recovery that would follow the current global economic slump, President Jacob Zuma said on Wednesday.

He was speaking in Cape Town at the World Economic Forum on Africa, at the end of a day of proceedings dominated by the downturn.

Zuma said that though people were losing jobs in many parts of the developed world, rich governments were able to respond with stimulus packages and by deploying existing social welfare systems.

"For most African countries, that are still highly indebted and dependent on aid for their revenues, the continuation of the current crisis will mean increased starvation, poverty and child mortality," he said.

"We must cushion our people against the impact of the crisis as best we can, but we also need to respond in the spirit of planning for a recovery."

He said South Africa viewed the economic downturn as providing both challenges and opportunities for the continent and the developing world in general.

Two issues that should receive special attention were the need for a transformed global financial system, and the growing protectionist measures being taken in developed countries.

A report released at the meeting earlier in the day, co-authored by WEF, the World Bank and the African Development Bank, said African governments would be wrong to conclude that free markets caused the financial crisis and should for that reason be avoided.

"It would be catastrophic for them to backed(al) on policies that facilitated improved economic performance over the past decade," the report noted.

Instead, governments should focus on strengthening what was needed for strong private sector-led development.

In a statement issued with the report, World Bank Africa region vice president Obiageli Katryn Ezekweli said investing in infrastructure would cushion the impact of the crisis and position Africa to take advantage of the rebound in the economy when it happened.

The countries that would reap the most benefit would be those that sustained reforms, strengthened governance and modernised local capital markets.

Speaking in a panel discussion following Zuma's address, former United Nations secretary-general Kofi Annan echoed Zuma's call for change in the global financial system.

He said reform of the International Monetary Fund and the World Bank would be difficult, but was essential.

The world needed institutions that were universal and democratic, and that therefore had greater legitimacy.

Countries currently on the boards of the two bodies would have to consider how much power they were willing to give up to make participation by emerging nations meaningful.

"Those with privileges will have to take a decision."

Annan said there was a risk that the economic crisis would lead to social instability, just as rising food prices last year had resulted in protests.

For this reason, foreign partners should not cut back on development assistance.


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