South Africa has joined a call by developing countries for more carefully considered global collective action in response to the economic crisis, ahead of its participation at a G20 leaders’ summit in Russia later this week.
The country has also called for more inclusive and representative governance arrangements in the management processes of international institutions.
This comes after speculation that the US Federal Reserve will soon cut back on the US$85-billion it has been pumping into the financial markets every month, which has caused increased turbulence in global financial markets.
“Emerging economies like South Africa have benefited from the actions of the Federal Reserve, as foreign investors have bought huge amounts of South African government bonds at fairly low yields and equities,” the Presidency said in a statement on Monday.
“Therefore, the prospect that the Federal Reserve will cut off these flows of funds has resulted in emerging market currency volatility, which has been yet another reminder of the risks and the potentially destabilising and negative effects that policies and shocks in major economies can have on other countries and regions.”
The summit also takes place against the backdrop of a fragile and uneven economic recovery – hence the talk of a “three speed” global economy.
“As the current volatility of emerging market currencies shows, decisions taken by countries based solely on their own national interest can have serious implication for other nations,” the Presidency said.
“There must be a greater recognition that we live in an interconnected world. ‘Decoupling’ is not an option for either developing or developed economies. The solution to all these challenges – turbulence in financial markets, the fragile and uneven economic recovery – lies in better global coordination of efforts.”
President Jacob Zuma, accompanied by Finance Minister Pravin Gordhan and International Relations Minister Maite Nkoana-Mashabane, will attend the summit in on Thursday and Friday.
South Africa hopes to promote and strengthen the interests of Africa and of the South on the understanding that, if managed carefully, the G20 does present meaningful opportunities for advancing much-needed global governance reforms and re-orienting the international development agenda.
A BRICS (Brazil, Russia, India, China and South Africa) leaders’ meeting will also be held on the margins of the G20 summit.
The meeting will afford BRICS leaders an opportunity to reflect on the progress made with regards to the implementation of the Durban Declaration, especially as it pertains to the planned BRICS development bank and currency reserve arrangement.