The Impact of the Economic Crisis on South Africa and Its Effects on Potential Development

THE IMPACT OF THE ECONOMIC CRISIS ON SOUTH AFRICA AND ITS EFFECTS ON POTENTIAL DEVELOPMENT

INTRODUCTION
All countries across the world are affected by the most severe economic crisis in the last 80 years. The crisis was caused by a range of factors including gross imbalances and inequities in the global economic system, the impact of the financialisation of economies, ineffectual guidelines in several of the major world economies and poor business practices, has resulted in significant asset depreciation, closures of companies, rising unemployment and a slowing down of economic growth, with most highly industrialised countries entering a recession.  
EFFECTS OF THE FINANCIAL CRISIS
Like other developing countries which are strongly integrated into the world economy and significantly dependent on its good health, South Africa has been affected by the sharp fall in demand for its export products and the fall in prices of key export commodities. The international credit crisis has meant that funds have become scarce and expensive and that portfolio investors are wary of emerging markets such as South Africa. (www.onlyinsouthafrica.com)

The result is that our growth expectations had to be sharply revised, downwards. The period and intensity of the downturn cant be forecasted with certainty, but growth is likely to be lower than previously expected at least in 2009, and 2010. This has potential implications for household incomes, employment, and investment and on social programmes partly through the slowdown’s effect on tax revenues for government. (www.amandlapublishers.co.za)

In the difficult conditions that face South Africa, the government must utilise their strengths, in fiscal space, the financial regulatory framework   and the resourcefulness of its citizens and institutions, to develop a response to the crisis and to commit to working together in addressing its impact on South Africa. (www.reuters.co.za)

South Africa needs social unity between all...