Jobs crisis dogs S.Africa's growth: finance minister

7th June 2011, Comments 0 comments

South Africa's economy has bounced back strongly from recession with 4.8 percent growth in the first quarter of 2011, but still faces rampant joblessness, the finance minister said Tuesday.

"Since the middle of last year, our economy has grown strongly -- driven by buoyant consumer spending, continuing high commodity prices and a recovery in the motor industry," Pravin Gordhan told parliament.

First quarter growth was up 0.3 points from the end of last year, he said.

"The latest GDP data for the first quarter of this year indicates growth of 4.8 percent on an annualised basis, with the manufacturing sector leading the recovery despite difficulties associated with the relative strength of the rand," Gordhan told parliament.

"Employment growth is far too slow, however. We face a very serious unemployment challenge, particularly amongst our young people."

Gordhan on Tuesday launched a nine billion rand ($1.3-billion, 911-million-euro) fund that aims to create 150,000 jobs in three years to fight a 25 percent unemployment rate.

South Africa wants to create five million new jobs by 2020 with joblessness seen as the biggest challenge to the government amid the world's sharpest divides between rich and poor.

The Organisation for Economic Cooperation and Development said last year that the economy would need to grow by at least five percent a year to make a dent in unemployment.

While South Africa's growth outlook had improved, Gordhan earlier told journalists that the world economy still faced much uncertainty.

"We're living in a world where nobody knows quite what the perfect answer is," he said.

"So in that context South Africa is in a very fortunate position to have its steady four percent growth or thereabouts. For us the challenge is to build on that and accelerate our successes."

South Africa's rand currency has made strong gains this year, reaching a one-month high of of 6.675 to the dollar on Monday, as investors are lured by the country's relatively high interest rates.

South Africa's benchmark rate is at 5.5 percent, compared to 0.25 percent in the United States.

The strong currency has hurt South Africa's exports, but also helped cushion the effects of high global oil and food prices.

Gordhan said South Africa would continue offsetting the robust rand, including by accumulating foreign reserves.

"The world needs to find a formula which enables better investment prospects for those funds in the developed world on the one hand, and long-term investment prospects for those funds within continents like Africa and South Africa in particular on the other hand," he said.

"So that the short term element of profit chasing is actually minimised to whatever extent possible."

© 2011 AFP

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