While the global economy continues to battle growth headwinds as it slowly emerges from a lingering post-recessionary phase, the greatest inhibitors to South African economic development are largely domestic and within government’s control, Finance Minister Nhlanhla Nene said on Friday.

“We cannot change US monetary policy or dictate how Europe addresses its economic problems and the current crisis in Ukraine.

“However, we have direct control over the shortages of electricity, over our labour relations and over our policies. We can change the destiny of our country if we work together,” he asserted during a lecture at the University of Fort Hare, in the Eastern Cape.

While acknowledging that South Africa remained vulnerable to volatile capital flows, Nene said the 0.6% contraction in the country’s economy in the first quarter of the year was not the result of external influences, but more likely the consequence of labour contentions in the mining and manufacturing sectors.

The mining and manufacturing sectors – which together accounted for roughly 20% of gross domestic product – contracted by 24.7% and 4.4% respectively in the first quarter.

Supply-side disruptions had also plagued the domestic economy over the last few years, weakening confidence and reducing the level of investment and household consumption.

Private investment grew by only 1% in the first quarter of 2014, while private household consumption recorded modest growth of 1.8%.

Despite weak economic growth, consumer inflation continued to rise and was currently at 6.6% above the South African Reserve Bank (Sarb) target range.

This posed a significant risk to the buying power of consumers and the cost of doing business in the country, compelling the Sarb to start an interest rate hiking cycle.

“But these challenges are domestic and, thus, within our control. The performance of our economy and the number of jobs created is not only [the] responsibility of government, but [the] responsibility of all of us,” he noted.

Nene further advanced that the National Development Plan outlined policies and actions that placed the country in a stronger position to address its domestic challenges.

These interventions included “heavy” investment in infrastructure to prevent bottlenecks in the economy that were preventing the country from producing and exporting.

Government’s suite of industrial incentives had also been increased and adapted to cater for the varying needs of businesses, including process improvements, machinery upgrades, industrial finance and export promotion.

“Government understands the importance of small and medium-sized firms for economic growth and job creation and has allocated R6.5-billion to fund small and medium-sized enterprises, while at the same time improving the tax regime for these companies,” he said.

Nene further committed government to taking clear steps to improve the domestic investment climate, including modernising its approach to tax policy, implementing financial reforms and ensuring investor protection.

“South Africa must stay ahead. Our compatriots in Africa have raised their game. They are implementing economic reforms, building infrastructure, educating their people, and building winning nations. We must [now] work harder and smarter,” he concluded.