SA’s policies will remain intact, says Gigaba
• Finance minister assures investors government is committed to fiscal course set by predecessor Pravin Gordhan
The credit-ratings downgrades will have serious consequences for ordinary South Africans, but structural reform will water the green shoots of the economy, says Finance Minister Malusi Gigaba. He was speaking on Wednesday to investors at the Development Bank of Southern Africa in Midrand, where he gave assurances that SA’s policies would remain intact.
The credit ratings downgrades will have serious consequences for ordinary South Africans, but structural reform will help the green shoots of the economy, says Finance Minister Malusi Gigaba.
Gigaba was speaking on Wednesday to investors at the Development Bank of Southern Africa in Midrand, where he gave assurances that SA’s policies would remain intact.
The minister insisted his surprise appointment to the Treasury did not signal a policy shift for the fiscus.
“We have to be disciplined in our message that, one, we take this downgrade seriously and, two, the downgrade is going to be significant on the economy and investors [and] on ordinary people,” Gigaba said.
“I have given the guarantee that, on the level of government, we are completely committed to the previous policies and programmes,” he said.
Price hikes and a rise in interest rates as a result of the downgrades would affect the poor and the middle class. The downgrades could also affect public-sector wage talks.
“If inflation rises, the wages have to rise and yet the economy is not in a position to entertain or accommodate all of those instances,” said Gigaba.
Despite this, “there is growing investment, the economy continues to be vibrant and grow and we must focus on structural reforms to improve our SMME [small, medium and micro-sized enterprise] sector, our cultural sector and our policy certainty.”
S&P and Fitch downgraded SA’s sovereign credit status to “junk”, citing likely changes in economic policy following the axing of former finance minister Pravin Gordhan.
At the engagement session with investors, Gigaba also said he would stick to the fiscal course set by his predecessor.
Argon Asset Management economist Thabi Leoka, who attended the meeting, said: “I wanted his assurance that there won’t be any policy change at the ANC policy meeting … [in June] and at the conference in December.
“He said it was unlikely that they would have any changes, especially on fiscal consolidation, which reassured me because it could change things for the worse — it could trigger a second downgrade….”
She said the meeting with investors was a positive move and the minister had calmed their nerves.
On Wednesday, the Presidency announced it was set to discuss the implications of the ratings downgrades at a special cabinet meeting.
“The president’s decision to convene a special cabinet meeting arises from the two downgrades and his feeling that we need to take cabinet on board and into our confidence with regard to the implications of the downgrades,” said Gigaba.
Investment Solutions chief economist Lesiba Mothata, who also attended the investor session, said Gigaba’s stance on fiscal discipline indicated SA would stick to the targets set out in the mediumterm framework.
Mothata also said investors were a lot more comfortable with Gigaba’s stance on radical economic transformation and state-owned enterprises after the meeting.