Ratings agencies sceptical of Gigaba’s ‘old’ plan

Finance Minister Malusi Gigaba’s action plan for stimulating growth in SA is not enough to instil confidence in ratings agencies, analysts say.

Gigaba tabled the plan two weeks ago in response to the recession in SA, promising reform of state-owned enterprises (SOEs), fiscal prudence and a new dialogue on the Mining Charter.

The plan has been widely criticised by economists for not promoting growth.

On Monday, Argon Asset Management economist Thabi Leoka said the plan was operational, but did little to stimulate growth. “There are solid timelines and it’s achievable but it isn’t a growth-inducing plan.”

Prof Raymond Parsons of the North-West University School of Business and Governance said: “It is not possible to already say what was announced ... will be adequate to restore confidence.”

The IMF said this month that a contingent liability shock could push SA’s gross public debt above 70% of GDP by 2022. Low growth that averaged 1.1% over the medium term would also push debt above 70%.

The IMF said its findings underscored “the urgent need” for SA to undertake reforms to increase economic growth and reduce its contingent liabilities.

While it still expected economic growth of 1% in 2017, policy uncertainty linked to political turbulence would weigh on confidence, the IMF added.

Fitch Ratings said on Thursday the plan was unlikely to significantly boost growth as most of the measures were part of President Jacob Zuma’s ninepoint plan in 2015.

Among Fitch’s concerns were governance standards at state-owned enterprises. “The fact that the measures have not already been approved points to how highly politicised they are and that their implementation cannot be taken for granted.”

However, the plan positively added firm deadlines for many of the measures which added ”urgency to policy-making”.