Business Day, 22 May 2008

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Finance Minister Trevor Manuel said yesterday it was vital for local political, church and civic leaders to engage directly with the communities involved in the xenophobic attacks across Gauteng. The solution was not for President Thabo Mbeki to read messages to the nation over the television, as some had demanded, Manuel said when releasing a report of the Commission on Growth and Development. The visible leadership of notable local leaders who were very close to the people was what the situation demanded. “That is preferable and far more effective than national statements,” he said. Manuel dismissed the views of traders and analysts who blamed the rand’s fall largely on concerns about the internecine conflict, or xenophobia. “We are living through a period now where there is a lot of volatility in exchange rate markets everywhere. A lot of it is in fact driven by high volatility of the dollar rather than a series of other currencies. “So I don’t get my knickers in a knot every time I hear these stories. There are a series of factors that speak to the fundamentals about our economy which are far more important.” The rand slid by 1,7% versus the dollar on Tuesday after photographs of the SA violence hit the front pages of international newspapers, despite a simultaneous decline in the greenback, which normally boosts the local currency. Manuel described the attacks as “unbelievably scary” and attributed them at one level to perceptions about access to resources, but at another level to a base drive to destroy others. He said the attacks were also a manifestation of unplanned urbanisation and widespread youth unemployment. The migration of people from elsewhere in Africa could also contribute to tensions which could “blow up” if not managed. Manuel said the need for political leadership linked up with one of the findings of the commission’s report that leadership was one of the vital ingredients to achieving high, sustainable and inclusive growth. Good policies themselves were not enough. They had to be implemented in an inclusive way which was not confined to elections. “The idea that you can have a democracy functioning purely on frequent elections clearly does not work. We need to be able engage with people and understand the issues affecting their lives a lot more clearly. I think that this is what some of these experiences talk to.” The 19 commissioners from around the world attempted to crystallise the success factors behind the growth of more than 7% achieved by 13 developing countries for 25 years since 1950. The features common to all 13 countries were macroeconomic stability, modest inflation and sustainable public finance. “No country is able to grow in a context of price instability and uncertainty over policy,” he stressed. “Fiscal responsibility has been at the core.” All the 13 countries had a future orientation, with high investment and savings ratios as well as an openness to the world and an ability to import knowledge and understand global demands. None of the successful countries were free-market purists, as the state had played a specific role in their development.