August 2010

GDP, consumption and development

In the first eight years of this century, World Bank figures show that Japan's economy expanded by just 5,0% while China's grew by 261%, and most believe that China will soon overtake Japan as the world's second-biggest economy. China's latest GDP growth is reported to have slowed to 10,3%. The Indian economy grew by 7,9% in the second quarter of this year, up from 6,1% in the previous quarter. Manufacturing in India grew by 9,2% between April and June and mining and quarrying by 9,5%. The IMF forecasts 7,1% GDP growth for Brazil in 2010 and 9,0% has already been achieved in the first quarter - surely an indication of better economic progress.

According to Pravin Gordhan, SA's growth will be moderated in the second quarter but the recovery is still intact and the South African economy will grow in 2010 more than the 2,3% projected in February. This follows 4,6% first quarter results. Growth for the second quarter is being moderated somewhat due to the slowing of manufacturing following concerns about a slowdown in Europe.

MechTech has difficulty following the notion that difficult times can be overcome by consumer spending. Are consumers not the people who are most directly affected by the difficult times themselves? Should GDP growth not be more closely associated with development: improvements in infrastructure; raising of health standards; job creation; the modernisation of workplaces; and the shift towards a better domestic life?

Our economy has benefited from the shielding effect of the World Cup. We know of the need to invest in new electricity generation capacity and simultaneously, in energy efficiency technology. We also have a dire need to become more globally competitive, as highlighted in this issue by BMG's World Class Production Efficiency Campaign. We need to focus our engineering and development efforts in making the current machinery operating on our mines and in our industries, efficient, productive and competitive.
This alone, could stimulate growth in the short term and represents an investment in a long-term sustainable future. The alternative is to become increasingly less successful than overseas competition, and eventually to become a net importer of everything.

We also have a needy Africa on our doorstep, which must represent a similar kind of opportunity to the internal markets available to China, India and Brazil. Let's stop being concerned about the slowdown in Europe, Japan or the US. Our economic success need not depend on the developed world consuming more of our exports. Instead, let's begin to see development itself in South Africa, Africa, China, Brazil and the rest of the developing world, as the vehicle for long-term economic stability.