Manuel: Not time for change

Cape Town - Finance Minister Trevor Manuel has issued an uncompromising warning to MPs on parliament's finance committee and to the ruling ANC's alliance partners, who are pushing for radical changes to macro-economic policy.

The economic climate, Manuel says, is not a time to "crow about issues" - it's a time for leadership and policy formulation underpinned by foresight and the global realities.

Addressing MPs after a gruelling schedule of meetings abroad, including the G20 summit and a meeting in Tunisia with African finance ministers, Manuel urged MPs to get to grips with the realities of an integrated global economy where no country was immune from the fallout of the current global crisis.

Manuel has come under fire recently from some of the ruling ANC's alliance partners who believe that macro-economic policy needs to be more expansionist.

"It is very important that we understand what the linkages are (between the domestic economy and the global crisis). It is not because of any mismanagement that the DG [director-general] has done. We are living through the cycle and it is important that we understand this," said Manuel who stressed that no country was an island, with the freedom to make isolated policy choices.

SA must be in In synch

Individual countries, in other words, had to make plans to deal with the fallout of this financial crisis in a manner that was in synch with plans being made by other countries.

"These (plans) are never going to remain on sovereign territory. These things are all going to interconnect," said Manuel who also took MPs through government options when it came to raising and spending more money which would be key to a more expansionary economic policy.

While Manuel called for South Africa's policymakers "never to lose foresight" and for its lawmakers to focus on policy, not the "noise" around daily trades, he stressed how government only has three sources of income: tax, borrowing or printing.

"If you tax heavily, you slow growth. If you print money, we'll of course we know a country to the north of us who has done this," said Manuel. He warned that the price for borrowing too much was the widening spread of financing debt.

He also urged MPs to digest the reality of key policies that regulate inflation and the level of savings.

"This is one of the key areas of debate on policy (in SA). In the first instance, what is understandable now is that the problems of US started with copious amounts of cheap credit. The disconnect between the cheap credit and the pool of savings is why millions of families (in the US and UK) now out of homes," said Manuel.

He added that to avoid going down the same road, South Africa needs to pivot on supply and demand of debt.

Manuel reiterated that South Africa is in a relatively comfortable position to take the knocks of the worst financial crisis since the great depression of the 30s, because it has crafted anti-cyclical policy.

- Fin24.com