South Africa’s economy is not growing fast enough to make a significant dent in the country’s 25 percent unemployment rate, said Finance Minister Pravin Gordhan.
Gordhan also repeated concerns that quantitative easing by some developed nations to buoy their economies posed the risk investors would pour money into higher yielding markets like South Africa, then pull it out suddenly.
Africa’s biggest economy, which came out of its first recession in nearly two decades late last year, is expected to grow by 3.0 percent this year and 3.5 pct in 2011, the National Treasury said last week, Reuters reports.
The Treasury estimates that if the country sustained 7 percent growth for 10 years, national income would double and the economy would generate 5.5 million jobs, which would slash unemployment from current levels of 25 percent, and reduce poverty.
“If we carry on with 3-4 percent growth, we are not going to create the jobs that we require,” Gordhan told a business dinner in the coastal city of Durban. “Let’s aim for that 7 percent.”
Labour unions have previously called for more aggressive interest rate cuts to help boost growth, a move which would also curb the strength of the rand currency, seen threatening local exporters’ competitiveness.
The rand has gained nearly 30 percent against the dollar since the start of 2009 as low rates in developed countries push investors towards emerging market assets offering higher returns.
“That’s the money that’s coming to Brazil and South Africa. That’s the money that’s coming in on a short-term basis and can pull out any time,” Gordhan said on Tuesday.
Expectations the Federal Reserve will undertake a second round of quantitative easing (QE) drove the dollar weaker on Tuesday, pushing the rand to a session high of 6.8801, its strongest level in a week.
Gordhan reiterated his call for G20 leaders meeting at a summit in South Korea later this month to come up with what he called a multi-lateral solution to boosting national economies and capping currency appreciation without undermining the global interest.