Economy on recovery path: Zuma

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South Africa’s economy is on the path of recovery but the government will maintain measures to boost jobs and growth, President Jacob Zuma said in a State of the Nation address on Thursday.

Speaking on the 20th anniversary of the release from prison of Nelson Mandela, he said the country had changed fundamentally in the past two decades and stronger growth was now needed to create jobs and meet post-apartheid social objectives.

“Now is the time to lay the groundwork for stronger growth going forward, and for growth that gives rise to more jobs,” Zuma said. The 91-year-old Mandela was present in parliament and parliamentarians and guests broke out in applause and song when he was helped to a seat in the house’s public gallery.

South Africa emerged from its first recession in 17 years with annualised GDP growth of 0.9 percent in the third quarter of 2009. Zuma said the economy was recovering but at an uncertain pace. “Economic indicators suggest that we are now turning the corner. Economic activity is rising in South Africa, and we expect growth going forward,” Zuma said.

He said the government would retain measures taken to boost growth but added there was an urgent need to create more jobs and to subsidise the cost of hiring younger workers. Up to a quarter of the country’s 50 million people are unemployed — a statistic condemned by the ANC’s trade union and communist allies.

Zuma said the government had nearly achieved its target of creating 500,000 new public works jobs opportunities by the end of 2009 but he stressed that these were not permanent jobs in the mainstream economy.

The government will spend 846 billion rand ($110.2 billion) on public infrastructure over the next three years, expand education assistance and also create a one billion rand fund to help commerical banks increase loans for low-cost housing. South Africa will also continue with preparations to establish a national health insurance system.

Analysts said the additional expenditure will create upside risks to the country’s budget deficit which is currently estimated at a record 7.6 percent of GDP for 2009/10. “Further budget risks emanate from the hint that the government is going to move forward with National Healthcare insurance. Overall I think tax hikes are now increasingly likely in the coming few years in order to be able to fund all this,” said Peter Attard Montalto, Emerging Markets Economist at Nomura International.

Zuma said a new industrial policy framework, expected to be released soon, and a new focus on green jobs would build stronger and more labour-absorbing industries. Security, logistics and infrastructure were in place to ensure the successful hosting of the 2010 Soccer World Cup, which starts on June 11, the South African leader said. “President Mandela was central in assisting the country to win the rights to host this great event. We therefore have to make the World Cup a huge success in his honour,” he said.

Zuma made no mention in his speech of revelations that he has fathered a child out of wedlock, which have drawn fire from allies and enemies alike and jeopardised his chances of running for a second term in 2014. The scandal knocks what had been a positive start to his five-year term, with a survey conducted in November showing 77 percent of the population were happy with his performance.

Zuma has shown few signs of heeding calls for a more leftist economic policy despite the loss of nearly a million jobs in the recession that hit last year.