Christine Lagarde calls for South Africa's support

Gordhan spells out steps the Treasury is taking to protect local economy from European contagion, writes TSHEPO MASHEGO

INTERNATIONAL Monetary Fund (IMF) managing director Christine Lagarde made it clear on Friday that she was fed up with Europe's economic problems. She urged South Africa to add its voice to calls for decisive leadership in the eurozone.

Further dithering would not only affect Europe but have damaging consequences for the continent's trading partners, including South Africa, said the former French finance minister.

Lagarde was in Pretoria for a courtesy visit to Finance Minister Pravin Gordhan. She later met President Jacob Zuma, Reserve Bank governor Gill Marcus, Minister in the Presidency Trevor Manuel and Economic Development Minister Ebrahim Patel.

Lagarde was adamant that the euro would not "disappear" this year as it was a "young and solid" currency.

But the year would not be a "walk in the park".

"Some European countries may have a recession - that is two consecutive quarters of decline - but the eurozone or Europe as a region should not suffer a recession.

"None the less, no European country will be immune to the crisis," she said.

Lagarde's visit comes as the IMF seeks to build international consensus on its efforts to contain fallout from the European crisis.

She said that the IMF had not lost sight of all other global problems, especially Africa's, while it was trying to sort out Europe.

"Africa has strong potential for growth, and is certainly not on the back burner at the IMF as we have 20 programmes running on the African continent."

Gordhan outlined some of the pre-emptive steps the Treasury is taking to cushion South Africa from any contagion from Europe.

"We're strengthening our economy on a number of fronts," he said.

"Firstly we're strengthening our financial sector, and secondly we're increasing and strengthening our regulatory regime.

"As we move to implement our 'twin-peak' model of financial regulation, we also will focus on fiscal sustainability.

"We do not want to South Africa's debt to be unsustainable," Gordhan said.

"And lastly, and perhaps more importantly, we want to focus on spending money on the right things," said the minister.

The key areas of concern Gordhan mentioned as warranting the government's scrutiny were currency volatility and how to manage international capital flows.

Weakening of the rand was caused by increased risk aversion, he said.

"Clearly the current weakness in the currency is beneficial for exporters but has the flip-side effect of inflationary pressures, which the Reserve Bank has to deal with."

He said South Africa's leaders needed to look beyond attaining economic stability and towards investing in things that would unleash growth.

"We can see that the world is a dangerous place.

"We urge the IMF to be even-handed and objective itself when it discharges its duties."

Gordhan said this year must not only be about attaining economic stability.

"We will also strive for economic growth and jobs."