South Africa’s President Kgalema Motlanthe outlined a four-point economic stimulus plan on Friday, which he said was aimed at minimising the impact of the prevailing economic crisis on the country’s growth and employment prospects.

Speaking in his inaugural, and probably his last, 'State of the Nation' address to Parliament, Motlanthe said that the interventions would be informed by the principles of a "countercyclical fiscal policy".

But he stressed, too, that South African government would pursue these measures within “prudent and sustainable” borrowing parameters and that it would also seek to rapidly reduce debt levels “whenever conditions turn for the better”.

In what was arguably a far more downbeat analysis of South Africa’s economic outlook than the 4% growth forecast he gave last week at the World Economic Forum in Davos, Motlanthe indicated that declining world demand for South African exports, coupled with still high inflation and interest rates, had forced South Africa “to tone down" its forecasts for growth and job creation.

But he stressed that South Africa and the rest of the continent was still poised for growth in 2009, albeit at a slower pace.

He said that, following recent interactions between the Presidency and various leaders from civil society, a task team had been created to work on various interventions to sustain the country’s growth trajectory.

Four key responses had already been identified including:

• Ensuring that government public investment projects, the value of which had increased to R690-billion for the next three years, were implemented;
• The intensification and expansion of public sector employment programmes;
• The development of mitigating actions to counteract an "excessive" investment slowdown by the private sector so as to prevent unnecessary closures of plants; and
• Sustaining and expanding social expenditure, including progressively extending access to the child support grant to children of 18 years of age and reducing the age of eligibility for the old age pension to 60 years for men.

On the R690-billion infrastructure programme, Motlanthe admitted that it would be necessary to “find creative ways to raise funds”.

“This will include support by our development finance institutions and loan finance
from international agencies, as well as partnerships with the private sector and utilisation of resources controlled by workers such as pension funds,” he outlined.

SUPPORT FOR FIRMS IN DISTRESS
One of the more surprising proposals contained in the address was that government was willing to support the private sector to avoid an investment pullback.

In fact, Motlanthe indicated that government would adapt its industrial financing and incentive instruments “to help deal with challenges in various sectors, and also encourage development finance institutions to assist firms in distress because of the crisis”.

“Alternatives to layoffs will be explored, including longer holidays, extended
training, short time and job-sharing. This will be combined with promotion of the Proudly South Africa campaign and stronger action on illegal imports,” he said.

Other more macrointerventions to support the stimulus, related to the intensification of competition policy and providing impetus to international efforts to prevent a return to trade protectionism.

“Critically, we should also safeguard the integrity of the world trade system,
complete the current negotiations on the Doha Round of world trade negotiations, and ensure that development aid is not scaled down,” the President said.