IT IS only going to get more difficult to reduce South African unemployment without the European growth levels of the first decade.
With Europe and other developed markets concentrating on reducing state spend for the foreseeable future, we have to consider what the global norm for growth will soon be. And will it be enough to help boost South African economic growth to the point where it makes a big enough dent on our unemployment?
Just how much is the target of 7% growth in South Africa going to be down to the government, local businesses and domestic consumption?
I have a fear that growth in the global economy won’t provide much of a boost over the coming years to help resolve the country’s most pressing problem.
On Tuesday, Statistics South Africa released the fourth-quarter employment figures, which show a slight drop to 24.9% from 25.5%. The decrease is unfortunately not a reflection of an economy in repair, but rather of an increase in the number of discouraged work seekers.
How the European economy will get along with less government spend as nations try to reduce their debt to gross domestic product levels is important to know to get a sense of where South African growth is heading and how close or rather how far we’ll still be from winning the unemployment battle.
There will be no "super" commodity cycle to help, as even China, which supported the commodity market in the aftermath of the 2008 crash, is set to shift its economic focus to domestic consumption versus the big infrastructure projects that have been consuming a significant chunk of our raw materials.
Waiting for global growth to get back on track to boost the domestic economy looks a dangerous bet at this point, given rising social tensions. Unemployment will only be reduced to a level where it can help ease social tensions, if the government and business actively invest in the domestic economy.
For the government, it means the promised infrastructure spend needs to start being delivered and that it should not focus on the easier route to social harmony of just increasing social spending to raise the pressure on households.
Increased spend will come with even more criticism from rating agencies, and a possible downgrade, but infrastructure spend has much better rewards in the long run than widening the social net.
But this decision may unfortunately be based on how many votes the ruling party can get.
Businesses that have been hoarding cash or choosing to pay out attractive dividends because of a lack of opportunities in the domestic economy need a shot of confidence.
And no one can say there’s too much of that going about either domestically or internationally.
European politicians and their central bank have been trying to inspire confidence in their economies for four years and are still battling. South Africa is only starting now, on the evidence from the Mining Indaba.
ARCELORMITTAL SA is set to release its fourth-quarter results on Wednesday, which will reflect the difficult economic conditions that steel makers such as the one led by Nonkululeko Nyembezi-Heita has experienced these past four years.
There has been some positive sentiment towards the sector in the closing stages of last year with some positive economic indicators that have warmed investors to the idea that 2013 may not be so bad. The sentiment has been evident in ArcelorMittal SA’s shares over the past couple of months. They’ve gained over 40% since reaching an eight-year low in November.
But the European Steel Association on Tuesday warned that the European Union steel market "looks set to remain stuck in reverse gear".
"Confidence may be rising, but only from a depressed level. Financing and credit are still tight. Companies remain highly risk aversive. Steel market conditions will remain difficult for the time being."
YET another example of the rising tension in the currency wars, which I have so often written about, was provided by the French president entering the fray.
"A monetary zone must have an exchange rate policy," said President Francois Hollande, as he spoke out against a strong euro.
Improving confidence in Europe has seen the currency of the 17-member common monetary union strengthen against the dollar, which certainly doesn’t help struggling car manufacturers in France, in this case.
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