S Africa may need out­side help to get econ­omy go­ing

Kuwait Times - - BUSINESS -

South Africa may need out­side fi­nan­cial as­sis­tance to get out of its eco­nomic spi­ral, Fi­nance Min­is­ter Malusi Gi­gaba said on Fri­day, call­ing for “dras­tic mea­sures” to re­vive growth. At the same time, embattled Pres­i­dent Ja­cob Zuma ad­mit­ted that the econ­omy may not hit the forecast 1.3 per­cent growth tar­get set by his gov­ern­ment, and urged po­lit­i­cal al­lies to dis­cuss poli­cies, in­clud­ing land re­dis­tri­bu­tion, to re­vamp the econ­omy. He called for “rad­i­cal so­lu­tions”-al­beit within the con­sti­tu­tion-to re­dis­tribute land to the coun­try’s black ma­jor­ity.

Both men were speak­ing at a con­fer­ence of the rul­ing African Na­tional Congress (ANC), which will be look­ing for a new leader to re­place Zuma in De­cem­ber. South Africa is in re­ces­sion and has an un­em­ploy­ment rate of close to 28 per­cent. It is also im­mersed in po­lit­i­cal rows over Zuma’s abil­i­ties and over how in­de­pen­dent the cen­tral bank should be. Gi­gaba, who was ap­pointed as fi­nance min­is­ter in March af­ter Zuma sacked in­ter­na­tion­ally re­spected Pravin Gord­han, said South Africa may need to get out­side fi­nan­cial help.

“Should the main in­di­ca­tors con­tinue to dis­ap­point any fur­ther we may have to seek as­sis­tance from quar­ters we have thus far avoided,” Gi­gaba added, with­out elab­o­rat­ing. Asked by Reuters if he was re­fer­ring to the In­ter­na­tional Mone­tary Fund, Gi­gaba smiled and said “Any”. The rand ex­tended its losses against the dol­lar as much as 0.7 per­cent lower, while bonds weak­ened af­ter Gi­gaba’s com­ments on the pos­si­bil­ity of seek­ing out­side as­sis­tance.

Isaac Mashego, se­nior econ­o­mist at Ned­bank, said with slow eco­nomic growth, the gov­ern­ment is go­ing to have to bor­row more. “This might mean go­ing to mul­ti­lat­eral in­sti­tu­tions like the IMF. This is the worst case sce­nario,” he said. The fund’s se­nior res­i­dent rep­re­sen­ta­tive in South Africa Montfort Mlachila was not im­me­di­ately avail­able to com­ment. A se­nior ANC mem­ber said Gi­gaba might have been talk­ing about the IMF but it could also be China or other sources.

With their economies floun­der­ing and cur­ren­cies sink­ing, African states from Nige­ria to Zam­bia have been seek­ing IMF as­sis­tance to fund in­fra­struc­ture and plug bud­get deficits. African na­tions broadly see China as a healthy coun­ter­bal­ance to West­ern donors, and Bei­jing has ploughed bil­lions of dol­lars into agri­cul­ture, roads, ports and rail­ways projects. Credit down­grades by two of the top three rat­ings agen­cies, based on the eco­nomic and po­lit­i­cal tur­moil, have dented busi­ness and con­sumer con­fi­dence in South Africa, which has just suf­fered two quar­ters of con­trac­tion.

Touch­ing on the po­lit­i­cal row over the cen­tral bank, Gi­gaba ac­cused the coun­try’s anti-cor­rup­tion agency of over­step­ping the mark in sug­gest­ing changes to the way the cen­tral bank works. A call by South Africa’s pub­lic pro­tec­tor for an over­haul of Re­serve Bank’s man­date-to fo­cus on growth rather than in­fla­tion and the cur­rency-rat­tled in­vestors this month, hit­ting the rand. The Re­serve Bank has filed a court chal­lenge to quash the rec­om­men­da­tion.

“The pub­lic pro­tec­tor does not have the power to di­rect par­lia­ment to amend the con­sti­tu­tion,” Gi­gaba told busi­ness lead­ers at the start of a six-day pol­icy con­fer­ence. “These rec­om­men­da­tions should have been di­rected at the fi­nance min­istry. We should all in­sist on the in­de­pen­dence of the South African Re­serve Bank.”

Land own­er­ship

The row also ex­posed wors­en­ing di­vi­sions be­tween state in­sti­tu­tions just as Zuma is em­broiled in a net of scan­dals. Zuma has drawn un­prece­dented crit­i­cism from se­nior rul­ing party mem­bers in re­cent weeks. A shock cabi­net reshuf­fle prompted in March rat­ings agen­cies to down­grade South Africa to “junk” sta­tus and un­em­ploy­ment is at a 14-year high.

The par­lia­ment said Zuma would face a no-con­fi­dence vote brought by the op­po­si­tion on Au­gust 3. Zuma’s crit­ics see the pub­lic pro­tec­tor’s com­ments as an at­tempt to un­der­mine the bank’s au­thor­ity as part of a broader at­tack on state in­sti­tu­tions, in­clud­ing the fi­nance min­istry, the tax author­i­ties and the pub­lic pro­tec­tor’s of­fice. The pres­i­dent re­jects such crit­i­cism.

Zuma will be re­placed as ANC leader at a na­tional con­fer­ence in De­cem­ber. Deputy Pres­i­dent Cyril Ramaphosa and for­mer African Union chair Nkosazana Dlamini-Zuma, the in­cum­bent’s ex-wife, widely viewed as fron­trun­ners. The con­fer­ence should of­fer clues to who may be in the as­cen­dant. Gareth Ne­wham, a gov­er­nance spe­cial­ist at Pre­to­ria-based think tank In­sti­tute for Se­cu­rity Stud­ies said al­though the con­fer­ence will fo­cus on pol­icy, the lead­er­ship bat­tle to suc­ceed Zuma would be at the heart of the dis­cus­sions. “The way pol­icy is spo­ken about and framed is go­ing to be a proxy for lead­er­ship bat­tle,” he said. —Reuters


JO­HAN­NES­BURG: South Africa’s rul­ing party pres­i­dent Ja­cob Zuma, left, greets Win­nie Madik­izela-Man­dela, and his deputy Cyril Ramaphosa, dur­ing the African na­tional Congress pol­icy con­fer­ence.

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