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Zuma cautions on currency war

Nov 11 2010 11:41 Sapa & Reuters

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Seoul - Leaders of Group of 20 (G20) nations must put the interests of the global economy ahead of their national economies and act to prevent a global currency war, President Jacob Zuma said on Thursday.

"We also urge G20 members this week to put the interest of the global economy ahead of those of their national economies," Zuma said in a speech prepared for delivery at a G20 business summit.

"Leaders around the world must act to prevent the recent round of currency devaluations from turning into a global currency war.

"We must collectively find an effective solution in the short term."

In a separate statement, Finance Minister Pravin Gordhan said on Thursday that confronting China and the United States in the debate over global imbalances and currencies would not provide a solution.

In a written response to questions in parliament about a G20 meeting of finance ministers last month, Gordhan said South Africa had called for rebalancing the global economy by addressing monetary policy challenges.

South Africa has joined a growing chorus calling on countries not to engage in unilateral moves to boost their currencies' competitiveness at the expense of others, and last week slammed the US for flooding markets with $600bn as part of measures to boost its ailing economy.

"South Africa as a small, open economy and faced with the problem of a rapidly appreciating currency called for a multilateral and inclusive solution to the issues raised," Gordhan said, reiterating appeals for currency issues to be solved before they escalate into a trade war.

"It is evident that confronting China or the US, the two main actors in the global imbalances debate and currency dispute, will not provide a solution," he said.

Gordhan is at the G20 summit.

Zuma also said that Africa survived the global financial crisis better than expected due to an expansion of domestic demand.

"The global economic crisis demonstrated two things about Africa's readiness for growth," he said.

Africa poised for 'massive' growth

"The first is that macroeconomic policies in most African countries have improved so much that they were able to ride through the crisis.

"The second important factor is that Africa continued to grow because of the expansion of domestic demand. The continent's one billion people are beginning to make an impact on the consumer markets."

Africa's growth potential is "truly massive" as it has considerable unexploited mineral wealth, 60% of the world's uncultivated agricultural land and the youngest age profile of any continent, Zuma said.

"There is still much to do in Africa to ensure that we reach our potential.

"African economic integration is still at an early stage, but we are pushing it very hard. Regional integration is the lifeblood for investment and trade in Africa.

"Our continent's growth potential is truly massive."

Zuma said South Africa was championing the building of Africa's north-south rail and road links, while other heads of state and government were championing other continent-wide African infrastructure programmes.

"We will be seeking partnerships with yourselves to take forward these focused programmes, falling within the ambit of the New Partnership for Africa's Development," Zuma said.

"We have big plans for Africa's development and should be able to succeed."

South Africa, he said, had set in motion a major infrastructure investment programme and was spending about R120bn a year on electricity supply, roads, rail, harbours and other economic and social infrastructure.

"We are also using this relatively slow period of growth to boost our capacity, so that we can better take advantage of global demand in future," Zuma said.

"In this regard, we are improving the quality of our education, as well as skills and human resource development."

pravin gordhan  |  jacob zuma  |  g20
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