Future global economic growth is likely to come from developing nations such as Brazil, Russia, India, China and South Africa (BRICS), but the debt crisis in the US and Eurozone will put pressure on all economies, both developing and developed. IDC chief economist Lumkile Mondi discusses some of the potential impacts.

Europe and North America have historically experienced high rates of economic growth compared to developing nations, which have enabled them to improve the standard of living of their citizens, eradicate disease and educate their populations. 

But they have reached a stage where they cannot grow at the same rates any longer. The emergence of the BRICS nations indicates that the time has come for a shift of economic power to developing countries and South Africa has a huge opportunity to harness its growth potential for the benefit of its citizens.  

Countries such as India and China are committed to development, including investing in infrastructure on a massive scale, especially in the areas of healthcare, education and transport. 

Rather than consumptive expenditure, these types of projects help to create jobs, which means workers earn more and can afford a better standard of living. This in turn helps to drive economic growth as demand for first-world services, such as technology, media and hospitality services begins to develop. It is possible to eradicate poverty within in a generation and this can be achieved if policies at a national level support it.  

South Africa’s ties with Europe have traditionally been very strong, having been our major trading partner before the financial crisis of 2008. 

China is now our biggest trading partner, with the export of commodities one of South Africa's biggest revenue

generators. This means that the local economy may be shielded to some extent from the debt crisis in the Eurozone, but it is worth remembering that the basket of goods we export to Europe and that which goes to China, are very different. While we export mainly manufactured goods, services such as IT and tourism, as well as food and fresh fruit to Europe, exports to China consist mainly of commodities such as coal.  Both markets are therefore important for South Africa to develop a diversified economy.  

The possibility of a double-dip recession is real. 

This could unleash volatility in the financial markets and means that South Africans who have invested in equity on the stock exchange through their pension funds, could see their savings eroded. But South Africa is running a low deficit in comparative terms of 5.1% of GDP, and the potential for government spending to improve water, electricity infrastructure means that the local economy could be boosted. The IDC forecasts economic growth to be 3.8% in 2011, 3.4% in 2012 and 4% in 2013.  

As a nation, we need to market South Africa as a country that is open for business and attracts foreign direct investment. 

Partnerships between public and private sector players can help to achieve this and the IDC is in an ideal position, as it has the skills and the track record. As an organisation we’re putting more emphasis on funding projects in the infrastructure space and in the energy sector as we see these as major growth drivers for the country’s economy. South Africa’s future is also intertwined with the rest of Africa and we aim to assist South African businesses to grow their presence on 
the continent.