Mar 05, 2013
World Bank economist urges SA to focus on savings, investment to bolster growthBack
DURBAN|Russian|BRICS Bank|Brazil|China|India|South Africa|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 Macro and Micro News
South Africa recorded its highest ever tourism month in December, a new Statistics South Africa (StatsSA) report shows, with a total of 937 792 overnight travellers, or tourists, of which 263 771 were from overseas and 668 045 from the rest of the continent. For 2013...
African presidents and policy makers are pushing back against pessimism to tell the world their continent's economic boom is real and sustained, but they say it must work harder to roll back poverty and create jobs for its restless youth. From Senegal to Nigeria and...
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
South African antenna designer and producer Poynting and provider of professional products, system integration and implementation and commissioning services for the broadcast and telecommunications markets in South Africa, African Union Communications (Aucom),...
Industrial automation giant Festo has been displaying some of the its ongoing research projects and latest automation developments and products at the Hannover industrial fair from April 7 to 11, as part of its Integrated Automation – The Next Steps theme. The...
South African retail companies are responding to the way in which e-commerce is changing their engagement model with customers by improving customer engagement channels and order fulfilment intelligence, says industrial and retail software company JDA Europe, Middle...
In support of the South African government’s mandate to create more jobs and promote sustainable development, multilevel marketing company Amway’ business model aims to assist government in easing the startup of business and encourage an entrepreneurial mindset...
The global energy outlook is that energy demand will double by 2050 and the world’s population will grow to nine-billion, creating a need for increased energy supply with reduced carbon dioxide (CO2) emissions.