(Adds rand level in last paragraph.)
Sept. 30 (Bloomberg) -- South African Finance Minister Pravin Gordhan said European nations don’t have a plan to sustain economic growth in the region even though they’ve agreed a bailout package to prevent debt defaults.
While the financial rescue gives “some confidence” to the global economy, “there’s not yet a plan to ensure the long term viability of the euro zone,” Gordhan said in a speech to the French South African Chamber of Commerce in Johannesburg yesterday.
Europe, which buys about a third of South Africa’s manufactured goods, is curbing spending to help tackle a debt crisis that threatens to engulf Italy as Greece faces default. Brazil, Russia, India, China and South Africa, which are members of the BRICS political group, agreed in Washington this weekend to help bolster the global economy.
“The commitment that the BRICS countries have made to Europe and the United States is that we will do whatever possible to assist in whatever way possible,” Gordhan said. “But it is important that those who are in the epicenter of the crisis provide the signals and the leadership that is required to indicate that they’re getting on top of these problems.”
The slowdown in Europe threatens growth in Africa’s largest economy, which grew an annualized 1.3 percent in the second quarter, the slowest pace in almost two years. Citigroup Inc. yesterday cut its 2012 growth forecast for South Africa to 2.8 percent from 3.5 percent, and said the economy will expand 3 percent this year, compared with a previous forecast of 3.4 percent.
German lawmakers yesterday supported a plan to increase the size of the 440 billion-euro ($600 billion) European Financial Stability Facility to help prevent debt defaults in the region. BRIC nations are willing to buy European bonds and increase funding to the International Monetary Fund to help ease the debt crisis, Gordhan said on Sept. 28.
The rand had its worst weekly decline since October 2008 last week, plunging 7.9 percent to as low as 8.6165 against the dollar, before paring losses. It is 17 percent weaker this year, the worst performing of the 16 major currencies tracked by Bloomberg. The rand traded at 7.9788 to the dollar as of 8:13 a.m. Johannesburg time.
--Editors: Nasreen Seria, Antony Sguazzin
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