Slowing of SA economy amid global financial crisis - DA calls on the ANC to pull its head out of the sand.

For the past year, the Democratic Alliance (DA) has been calling on the ANC government to provide us with their plan outlining how we are going to protect ourselves from the effects of the global financial crisis. We expect the government to provide clear, consultative and transparent leadership. Instead what we have received is political posturing from the ANC's alliance partners and silence from those in government who are tasked with the management of our economy. Evidently, they do not have a plan.  We can ill afford this murky confusion.

Last Friday, the ratings agency Moody's reiterated the need for decisive action. They cited the following indicators to show that our economy is slowing considerably.

• A plunge in international commodity prices,
• Falling domestic and international demand
• Threats of further job losses.

Some analysts have predicted that we are facing a technical recession, whilst others have indicated that there will be no improvement in our economic prospects until the second half of the year. Clearly, we have not been protected from the second round effects of the global slowdown. This economic crisis is affecting us all.

The ANC's manifesto has done nothing to map a way out of this crisis and has enforced the uncertainty surrounding the future management of our economy. Ignoring the unprecedented risk aversion in the international capital markets, it sets out a wish list of fragmented policy goals that some economists have predicted will lead to R42 billion of additional expenditure. The ANC has not indicated how it will pay for its manifesto but if it is to do so it will need to either raise taxes or borrow more money from abroad. But the deteriorating economic climate will result in less money being available to be collected for tax, and risk aversion abroad makes it more expensive for us to borrow foreign money.

In order for our social development goals to be achieved, we need to ensure that our tax base is extended and maximised. This is the only sustainable way for the government to have the financial resources necessary to do its job. Increasing tax rates will not necessarily lead to more tax revenue, it will however further strangle companies already struggling in a subdued economy. Increases in taxes will act against growth.

In responding to the challenge presented by the slowdown in our economy the DA calls on the government to minimise the perception of risk in our economy by stridently confirming that our orthodox macroeconomic policies will not be changed after the election. In order to reduce our vulnerability to our current account deficit, we need to increase our domestic savings rate, which will provide local savings pools for our investors rather than forcing us to borrow from offshore.  In the longer term we need to move towards lowering our corporate tax rates so as to make South Africa a more attractive home for foreign companies.

The DA yet again calls on the government to tell its citizens what plans are being implemented in order to lower the impact of the global slowdown, and to minimise job losses. Our people cannot afford for our future prosperity to be compromised by the stagnation of a political movement paralysed by its own internal political wrangling.

Statement by Kobus Marais, MP, Democratic Alliance spokesperson on finance, January 19 2009