Hold the line

Sunday Times Editorial: It would have seemed unimaginable a few years ago that some of the world's biggest and most developed economies would be teetering on the brink of financial collapse in 2011.

Last-minute intervention by Europe's leaders to put a Band-Aid on the continent's gaping wounds as Greece accepted one of a string of aid packages has provided only temporary relief to a world shaken by uncertainty.

It is no longer unthinkable that the economic powerhouse of the US will go into debt default.

Minister of Finance Pravin Gordhan has indicated that the ongoing crisis will have an effect on our economy, albeit a limited one.

South Africa has been adept at inuring itself against the financial chaos around it, largely owing to excellent regulation of our financial system - which has kept reckless lending to a minimum - and a heathy attitude towards the accumulation of debt.

As we are not, by a long shot, over the crisis, strict adherence to fiscal discipline, specifically borrowing, is key to sustaining the economy.

More strident voices have been calling for increased state interference in the economy, including nationalisation, which would necessitate borrowing on a huge scale. Had the mines been nationalised in 1994, as was mooted, South Africa would be in serious trouble right now. As it is, infrastructure development demands have created ballooning debt at our parastatals at an inopportune time.

The government has done well to keep borrowing in check and fiscal discipline tight.

It cannot afford to loosen the belt. The evidence, from Greece to the US, is overwhelming.