'SA can afford $2bn'
ECONOMISTS said South Africa's contribution towards an IMF "firewall fund" sends the "right signals" to trade partners in Europe, and will stimulate local manufacturing.
The IMF fund totalling $430-billion is aimed to mitigate against further deterioration in eurozone economies and "would be drawn as necessary by IMF members".
National Treasury spokesman Jabulani Sikhakhane said leaders at the G20 Summit in Los Cabos, Mexico, including President Jacob Zuma, had made "firm commitments" to increase IMF resources to more than $430-billion, to serve as a backup in the event of further deterioration in the eurozone.
Sikhakhane said the $2-billion promised by Zuma would be drawn as necessary from foreign reserves.
Econometrix economist Manqoba Madinane said the contribution to the "firewall" fund was in South Africa's best interest, given that the eurozone accounted for 33% of its net trade.
Europe, an export destination for manufacturing output, has been gripped by a debt crisis in the last few years, threatening employment and growth in South Africa's manufacturing sector.
Manufacturing, driven mainly by the automotive sector, is one of the Eastern Cape's major economic sectors, contributing an estimated 30% towards employment and 17% of provincial output.
"We have very large exposure to the European Union. I think this is an important signal that we are willing to help," said Madinane.
"A key component driving jobs is the manufacturing sector, which has been shedding jobs in large numbers in the past few years because our export demand (from Europe) has fallen significantly. We need the EU to recover."
First National Bank chief economist Cees Bruggemans said South Africa had $50-billion in foreign reserves and could afford a $2-billion contribution to fulfil its global obligations.
Said Sikhakhane: "Global growth has slowed, and unemployment is rising. The resources could be used by all members of the IMF to stave off the risk of another financial crisis, which would probably lead to a sharp global slowdown."
The resources would be available for the whole membership of the IMF, and not earmarked for a particular region, he said.
In April, G20 countries and a significant number of other IMF members confirmed their participation in this effort. The move comes at a time when European countries Portugal, Italy, Greece and Spain, nicknamed Pigs, battle to ward off the debt crisis.
According to economist Dawie Roodt, South Africa's contribution to the IMF fund would have minimal impact on the local economy because the reserve fund, which is used to buy US treasury bonds, would simply be lent to the IMF.
"It's a good political gesture. The public does not need to be concerned because the money will be taken from reserves that the Reserve Bank normally uses to buy US treasury bonds. It will now be lent to the IMF and probably earn better returns," said Roodt.