The current global growth model that relied primarily on the debt-laden American consumer was imbalanced, undesirable and unsustainable, Deputy Treasury Secretary Neal Wolin said during his visit to South Africa on Wednesday.
Speaking in Johannesburg on the anniversary of the historic election of Barack Obama as the forty-fourth US President, Wolin stressed that the deficit of the world's biggest economy would decline as stimulus spending was wound down over the coming year, and that the combination of increased consumer savings and a falling deficit meant that the US could "no longer be the driving force of global expansion".
The US government was about halfway through its R787-billion stimulus spending, with the balance of the money set to flow until the end of September 2010.
In the initial stages, much of the money had been absorbed through tax cuts, a scrapping allowance for vehicle trade-ins, and the employment, at the State level, of teachers, as well as emergency-service and police officers.
It was anticipated that federal government funds would now increasingly flow towards infrastructure and healthcare programmes, as well as clean-energy technology developments and projects.
Wolin also dismissed suggestions that the country's recent 3,5% rise in economic growth during the third quarter was overly stimulus fuelled, noting that the growth numbers were relatively "well distributed" across key sectors.
But Wolin also stressed that, while the stimulus had been built around immediate relief and investments that made growth sustainable and would continue, a more "sustainable" framework was needed for future US and world economic growth.
"Achieving balanced growth will not be easy," Wolin emphasised, adding that, while the US imbalances had to be corrected, it was also necessary for economies that relied heavily on exports, external trade surpluses and large foreign exchange reserves to make adjustments.
He said that as a member of the Group of 20 (G20), South Africa had a role to play in helping to build a more sustainable and balanced model for global economic growth, while the shift from the Group of Seven towards the G20 reflected the growing importance of emerging economies such as South Africa, India, Brazil and others.
Besides economic rebalancing, the US government was particularly keen for South Africa to participate actively in global financial regulatory reform and the economic development here in Africa.
"You [South Africans] come to the table with a great deal of credibility. Your banks are solvent and have been well managed, with little exposure to toxic assets. South Africa's financial regulation is strong," Wolin said.
However, he also stressed that South Africa should not diminish the vigour with which it approached the international regulatory reform effort, noting that the country had suffered greatly from the economic fallout of the financial crisis and will have an even greater stake in ensuring financial stability as its economy becomes more globally integrated.
South Africa has descended into its first recession since 1992 and has shed nearly one-million jobs since the start of the year, raising the country's already dismal unemployment problem.
Wolin said that financial regulatory reform was on the agenda when he met with the incoming governor of the South African Reserve Bank, Gill Marcus, on Tuesday and would also be canvassed in meetings with Deputy Finance Minister Nhlanhla Nene.
TRADE & PARTNERSHIP
Also on the agenda was the potential for a deeper partnership between South Africa and the US in promoting trade between Africa and the US, as well as intraregional trade.
The US's newly appointed ambassador to South Africa, Donald Gips, reported that significant progress was being made in establishing the South Africa-US Business Forum, proposed by Secretary of State Hillary Clinton during her recent visit to South Africa.
Gips said that he has been impressed by some of the green technology innovations available in South Africa, which he said could find application in the US.
But he also stressed that the US was keen to support South Africa in expanding its intra-African trade, arguing that a big expansion of trade across the continent would be supportive in helping South Africa meeting its job-creation objectives.
"Through the business council, we would also be looking for introduce big and small businesses to the trade opportunities," Gips said, noting that greater effort would be given to promoting Africa as a market that will soon comprise one-billion people in some of the fastest growing economies in the world.