Zuma: SA faces a recession

Johannesburg - The biggest challenge facing South Africa during the economic crisis is protecting jobs, ANC president Jacob Zuma said on Wednesday.

Since the beginning of February, there is a growing view that the world economy is not likely to recover soon and the downturn may be deeper and longer than expected, he told Business Unity SA (Busa) in Sandton. This pessimistic view is supported by the fact that with global trade collapsing, countries are becoming more protectionist.

While household spending and business investment should recover thanks to falling interest rates and strong public sector investment, Zuma expects that South Africa is likely to see a slower rate of growth for the next year and a possible recession.

Finance Minister Trevor Manuel earlier dismissed recession forecasts and still expects the SA economy to notch up positive growth this year.

Zuma said the greatest challenge was to save jobs.

"The first reaction of business when the economy shrinks is to look at retrenchment. We must reach an understanding that we will use every possible innovative method to prevent job losses."

He said that the manufacturing industry has reached its limit in terms of what it is capable of producing and is retooling to increase productivity. "We see the result of this in the balance of payments due to an increase in the importation of new machine tools."

Government and businesses must look at how jobs can be retained during the "retooling" phase and thereafter, Zuma said.

He added that corruption in the public and private sectors needed to be addressed.

"We must pay attention to the rules and regulations that govern public institutions and the behaviour of public representatives, public servants and other people in positions of responsibility."

Earlier president of the National African Federated Chamber of Commerce and Industry (Nafcoc) Buhle Mthethwa said small businesses were the most hit by the economic crisis.

"The increase in unemployment as result of the economic meltdown means reduction in the buying power... late payment by government departments is also a threat to small business."

She said government intervention was not reaching small business in rural areas, and she called for the establishment of a ministry responsible for small business.

Deputy chief executive officer of Busa, Raymond Parsons, said international trade was expected to fall by 2.8% compared with growth of 4.1% in 2008.

"A serious global recession is impacting on jobs, incomes and expectations," he said.

- Fin24.com and Sapa