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Nene: Nigeria's success a warning to SA

East London - The success of Nigeria and the success of other African countries should serve as a warning to South Africa, according to Finance Minister Nhlanhla Nene.

"South Africa must work harder and smarter and take clear steps to improve the investment climate and stay ahead in Africa," Nene told students at the University of Fort Hare on Friday.

"The growth of the South African economy is not sufficient to address our challenges of poverty, inequality and unemployment," said Nene.

"Despite weak economic growth, consumer inflation is rising and is currently at 6.6%, above the SA Reserve Bank's (Sarb) target range."

He said this poses a significant risk to the purchasing power of consumers and the cost of doing business in the country.

Attract firms

"We cannot rely on the star companies of yesterday if we want to win tomorrow. Our compatriots in Africa have raised their game by implementing economic reforms, building infrastructure, educating their people and building winning nations," he said.

Economic success is much like success in football in his view.

"One year you are Spain, beating Holland and grabbing the trophy. The next time you can’t even make it to the second round," he explained.

Nene visited the Mercedes-Benz factory in the area to see the manufacturing of the new C-class.

"Mercedes could have chosen anywhere, but they chose here. Next time, we may not be so fortunate. The next C-class might be built elsewhere," warned Nene.

"To continue to attract firms such as Mercedes-Benz to our country, we must take clear steps to improve the investment climate."

Although South Africa cannot change US and European monetary policy, it has direct control over electricity shortages, over labour relations in the country and over its policies, according to Nene.

"We can change the destiny of our country if we work together. The performance of our economy and the number of jobs created is not only a responsibility of government, but a responsibility of all of us," he said.

"Supply side disruptions have plagued SA's economy over the last couple of years, weakening confidence and reducing the level of investment and household consumption," said Nene.

He sees the key challenges to SA's economic growth as domestic and, therefore, within the country's control.

Various measures taken

He believes the National Development Plan and various measures announced by President Jacob Zuma in June will help to jump-start the economy.

"We are investing heavily in infrastructure to release bottlenecks in the economy, which are preventing us from producing and exporting. We are opening new universities to increase the number of high skilled South Africans," said Nene.

He said government is exploring ways to use the green economy and the ocean to provide new sources of economic activity, cheap energy and jobs.

"Government understands the importance of small and medium-sized (SMEs) firms for economic growth and job creation and has allocated R6.5bn to fund SMEs, while at the same time improving the tax regime facing them," said Nene.

"Moreover, South Africa is a favoured hub for international companies wanting to expand into Africa. Growth has been pronounced in dynamic sectors with high growth potential, including technology, telecommunications, financial services and retail."

The SA economy contracted by 0.6% in the first quarter of the year, as mining and manufacturing production fell sharply and growth in other sectors remained modest.

Private investment grew by only 1% in the first quarter of 2014, while private household consumption recorded modest growth of 1.8%.

Due to the strikes in the platinum sector and maintenance of petroleum refineries, the mining and manufacturing sectors - which together account for roughly 20% of gross domestic product (GDP) - contracted by 24.7% and 4.4% respectively in the first quarter.

- Fin24

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