Gordhan feels the heat
Finance minister to meet ratings agencies today
in Washington FINANCE Minister Pravin Gordhan says that a lowered global outlook on growth by the IMF and the World Bank has put extra pressure on South Africa to prove that it can make tough decisions and has the will to do so.
Gordhan was speaking this week on the sidelines of the IMF and World Bank spring meetings in Washington, DC, where he also participated in a set of decisions taken by finance ministers of the G20 group.
“South Africa can’t, for the foreseeable future, rely on the resurgence of global growth. Although global growth is not zero, it certainly is on a declining path,” Gordhan said.
The IMF and World Bank growth forecasts for South Africa are also slipping downwards.
The IMF has halved its projections for growth in South Africa this year to 0.6% from the 0.7% it forecast in January, which is below National Treasury expectations of 0.9%, while the Reserve Bank and World Bank predict 0.8%. The IMF expects growth of 1.2% next year.
Gordhan said a nine-point programme to invigorate growth announced by President Jacob Zuma during his state of the nation address earlier this year and a plan to exploit ocean resources, the benefits accruing to tourism because of the weaker rand, efforts with the private sector and labour to counter a downgrade and to get greater investment into the economy and support for small businesses, all assumed greater importance.
“We have to do enough for ourselves to assure people that we co-operate as social partners to put South Africa back on a stronger growth path and counter the negative global climate, but do the best we can to avoid any potential downgrade,” Gordhan said.
He was due to meet with the ratings agencies in Washington today.
He met with IMF MD Christine Lagarde this week to convey a message of South Africa’s commitments to the plan spelt out in the state of the nation address and his 2016 budget. CHIEF WHIP: Christine Lagarde, MD of the IMF, at a conference of the Institute for New Economic Thinking at the IMF’s headquarters in Washington this week. See Pages 2 and 9
“We have the opportunities over the next four to five weeks to make serious announcements of decisions we can make collectively, and demonstrate our will to implement those decisions so that we can earn some credibility.”
Antoinette Sayeh, head of the IMF’s African Department, said the budget Gordhan presented in February did a “good job” in balancing the need for prevailing macro stability while attempting to mitigate the impact on growth.
“Whether that budget is implemented in a way that leads to the results envisaged will certainly depend on whether it’s accompanied by structural measures.” Sayeh also said skill building was necessary to make South Africa a more competitive economy.
She acknowledged efforts already under way. “There is still quite a bit of work to be done but authorities are working hard to deal with them.”
Gordhan said: “We are developing a plan and we want to move the economy differently. They [funding agencies] will give us whatever support we require. We don’t need any financial support — fortunately. We take our fiscal sovereignty quite seriously. It’s more at a level of policy advice and suggestions of what we could do as a country.”
Gordhan said the World Bank and New Development Bank would make available resources for projects the country had in mind. “There are new opportunities through the New Development Bank that we didn’t have before. We also met as governors of the New Developuncertainty MAN WITH A PLAN: Finance Minister Pravin Gordhan ment Bank. The management team is doing excellent work and they’ll build up more steam as we go into the rest of the year.”
At 0.6%, South Africa’s growth is low and in per capita terms the country is becoming poorer.
There was an overall sense of regarding regulation, which made it difficult for investors to commit funds. This environment is difficult for macroeconomic policy.
Growth is also challenged by the impact of the drought, which is pushing up food prices and triggering rising inflation.
An IMF official said the impact of the interest rate hikes by the Reserve Bank — which had raised rates by about 200 basis points over two years — had not all filtered through.
But the IMF deems the Treasury and South Africa’s expenditure ceilings to be credible.
On the reappointment of director-general Lungisa Fuzile, whose contract ends in May, Gordhan said: “You’ll hear some announcements in this regard as soon as we’re finished on government processes. He is very committed to ensuring some of the tasks that we face will get done.”
Recently the Constitutional Court ruled the Treasury must calculate the money to be paid back to the fiscus for upgrades to Zuma’s private residence at Nkandla. “That’s work in progress and as soon as we’re ready we’ll take our report to the Constitutional Court. We’ll look at what the judgment requires us to do and do what we’re required to do.
“I don’t want to speculate about anything else,” Gordhan said when pressed further.
They’ll give us whatever support we require. We don’t need any financial support — fortunately
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