The combination of global and domestic economic circumstances provides a real test for South Africa's economic policy and this is likely to continue in 2009, President Kgalema Motlanthe said on Tuesday.

He was addressing an annual summit meeting of the National Economic Development and Labour Council.

Motlanthe said it had been a busy and challenging year for social dialogue, and there had been complications that were currently associated with globalisation.

"The rise in inflation and associated interest rates hikes and the relative weakness of the rand have placed increased pressures on the South African economy and particularly on the poor."

Motlanthe said the crisis that had spread through the United States and Europe had introduced recessional pressure around the world and that rising food and fuel prices had all affected the growth process.

"I have no doubt that the government will bring a new set of issues and challenges to the process of social dialogue after April next year."

While the economy had maintained a growth rate of close to 3 percent per annum in per capita terms since 2004 until early this year, the recent results had shown that "we have entered different times".

"The last quarter has registered a growth rate of 0.26 percent, which indicates that our growth prospects are taking a dive."

He said it had always been the view of government that there was nothing inherently destructive in the process of globalisation and it was a process that countries had to engage with in order to make it a positive force for all people.

An important way in which South Africa was engaging with it was through efforts to strengthen the regional economy, such as the Southern African Development Community Fee Trade Area.

Improved regional competitiveness was also a necessity to continue weathering the storms of globalisation.

"Given some of the social issues that we face... it may be imperative to strengthen the current social dialogue so that it plays an even, constructive role in facilitating growth and social justice," Motlanthe said.

He said there needed to be more investment in transport and energy infrastructure so that the country could deal with the constraints of the recent past.
"At the same time we need to address the ongoing challenge of ensuring an adequate supply of skills to the economy - in both private and public sectors."

However the biggest challenge facing the country was how to ensure greater equality, and improve human development and social justice in the region in the current phase of globalisation.

"Events during this year clearly point to the fact that we have a long way to go if we are to ensure that a better globalization translates into a better and more secure life for people everywhere."

The president said continued scourges of HIV/Aids and crime impacted negatively on the lives of everyone, but also on the economy.

"They highlight very sharply the connection between social problems and economic development.

"The attacks on immigrants earlier this year also brought this into sharp focus when they were blamed for aggravating unemployment and downward pressure on wages."

Motlanthe said the labour market the country had "inherited" was marked with poverty and high levels of unemployment among others and that there continued to be discrimination against black people, women and other groups.

"It is incumbent upon us all, including government, to minimise the adverse impact of these forms of insecurity.

"To ignore them will affect our ability to make progress towards greater social justice for all.

"It will also retard our ability to grow and to compete internationally," said Motlanthe.