Mar 05, 2013
World Bank economist urges SA to focus on savings, investment to bolster growthBack
DURBAN|Russian|Africa|BRICS Bank|Projects|Africa|Brazil|China|India|South Africa|Infrastructure|Kaushik Basu|Pravin Gordhan
© Reuse this
Having worked as chief economic adviser to the government of India immediately prior to the appointment, Basu stressed that, while he was ill-equipped to provide specific policy suggestions, experience from other emerging economies showed that increased savings and investments had stimulated higher growth levels.
“Yes, you will still have short-term slumps in growth, but the growth rate can be pushed up a lot [through higher savings and investment rates].”
Speaking at a function organised by the Wits Business School, he said the experience of India is this area was “stark”.
“India used to be a low-saving country. Then, in two-steps, in the late 1970s and 2001 and 2002, India’s savings rate and investment rate just jumped up. And now, India saves and invests like other East Asian countries and the growth moved almost in step with that,” he said, while acknowledging that India was currently concerned with its recent fall-off in growth rates.
“So, I think South Africa ought to pay a lot of attention in stepping up on this.”
In the 2013 Budget Review, the National Treasury lamented the fact that domestic savings rates remained low, which was resulting in a significant gap between investment and savings.
It also noted that South Africa would need to attract cumulative inflows of global savings of R703-billion over the coming three years to finance the current account deficit, which would require improvements in both investor confidence and the investment climate.
In the longer-term, the National Treasury said structural improvements in the current account would require a significant increase in the domestic savings rate and decreased reliance on foreign savings.
However, Basu praised Finance Minister Pravin Gordhan’s continued focus on growth in the recent Budget, arguing that it was important for emerging economies to continue to emphasise inclusive growth during what was likely to be a period of relatively slow global growth, possibly until 2015.
“For emerging economies, where there’s a lot of poverty . . . there is a moral urgency of a kind that industrialised countries don’t have,” he said, arguing that emerging countries, thus, had to think of ways to sustain even modest growth levels.
Gordhan lowered his growth outlook for 2013 to 2.7%, while forecasting 3.5% and 3.8% for 2014 and 2015 respectively.
Basu also argued that the World Bank was unfazed by the prospects of the emergence of a new development bank funded and managed by the Brics bloc, comprising Brazil, Russian, India, China and South Africa.
He said the “lending space” had increase materially since the late 1940s, when that space had been dominated by the World Bank and the International Monetary Fund. There was, therefore, room for a number of multilateral lenders, particularly in supporting infrastructure projects.
But he also stressed that the World Bank was a “changing institution” and that it would be focusing on scaling up its activities in the area of infrastructure development.
“There is an awareness in the World Bank that there is greater need for infrastructural money in emerging economies and we are looking at ways in which we can attend to this.”
It was anticipated that the so-called ‘Brics Bank’ would emerge as a key theme of the fifth annual Brics Summit, which would take place in Durban at the end of March.
Should such a bank emerge the idea would be for it to mobilise domestic savings and cofund infrastructure in developing regions.
Gordhan noted in his recent Budget address that, collectively, Brics countries held reserves totalling $4.5-trillion.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines
Other Video News
Updated 59 minutes ago The Gauteng Treasury has outlined firm plans to work more closely with municipalities and local spheres of government to improve financial management, accelerate the payment of invoices and identify new sources of revenue generation, provincial MEC for Finance...
Updated 1 hour 18 minutes ago Gauteng MEC for Finance Barbara Creecy revealed in a statement on Friday that the leadership of the Gauteng Department of Finance (GDF) have acknowledged that they have been “ambivalent” about their mandate and direction, and have consequently been “more...
Updated 1 hour 31 minutes ago Eskom’s appointment of former mining executive Mike Rossouw on a one-year, extendable assignment appears to be closely associated with Public Enterprises Minister Lynne Brown’s appeal for “extraordinary” steps to be taken to deal with the “unsatisfactory”...
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...