HEY, NUMBER ONE CONTROLS THE TREASURY ANYWAY
Presidency denies rift with Gordhan ahead of ratings decision, saying Zuma controls state
AHEAD of a crucial week for South Africa, National Treasury Director-General Lungisa Fuzile warned that political “noise” was undermining the country’s ability to attract investment.
Speaking on Friday at the Metals and Engineering Indaba, at which Finance Minister Pravin Gordhan had been scheduled to speak, Fuzile said South Africa could do better without the political noise, specifically suggestions that the job of the finance minister was under threat. “We must make sure our discourse must not undermine our ability to attract investment. That’s all. At the same time we’ve got to reduce the amount of noise in our system, especially as it pertains to various policies, so that we improve confidence and begin to be or make our country an attractive investment destination.” Asked why Gordhan did not attend the event, Fuzile said they had agreed that if Gordhan was tired, Fuzile would speak at the event.
This Friday, S&P Global Ratings will announce its decision on the country’s credit rating.
On Friday afternoon, the Presidency issued a statement saying President Jacob Zuma was not “at war” with Gordhan over control of the Treasury.
The Presidency said it “strongly condemns the toxic narrative that is being promoted in the media that insinuates that President Jacob Zuma is engaged in a certain ‘war’ with the Minister of Finance” to take control of the Treasury. But, the statement said, it should be noted that the president — as the head of government and by virtue of the fact that he appoints ministers and they report to him — controls all government departments including the Treasury. “It is therefore absurd to say that the president would be engaged in a struggle to control a government department that he already controls, and also when he actually controls the whole of government,” it said. Recent reports have spoken of a clash between Zuma and Gordhan, who has been asked by the Hawks police unit to explain his role in the creation of a tax surveillance unit at the South African Revenue Service, which he ran between 1999 and 2009.
Gordhan said last week that “recent media reports about my arrest — imminent or not — have been extremely distressing for my family and me”. The Presidency and the police denied the reports.
S&P and Fitch Ratings were in the country this month to review efforts by South Africa to grow the economy.
Moody’s has kept South Africa’s rating on hold at Baa2, with a negative outlook, which is two notches above sub-investment grade, or junk. South Africa’s foreign currency rating by S&P is currently at BBB-, one notch above junk and with a negative outlook. Fitch holds the same rating, but with a stable outlook.
Investec chief economist Annabel Bishop said Investec did not expect the foreign currency rating to be changed and she forecast that S&P would cut South Africa’s long-term sovereign local currency debt by one notch, to BBB from BBB+, which would still be an investment-grade rating.
S&P has highlighted slowing growth and high sovereign debt as risks to its rating.
Jan Friederich, Fitch’s head of Middle East and Africa sovereign ratings — speaking at the Nedgroup Treasurers Conference in Johannesburg this week — warned that South Africa should avoid “quick fixes” in the run-up to local government elections in August. This included introducing a populist minimum wage. Talks between business and labour about the minimum wage had deadlocked, Nedlac said this week. The underperforming economy also posed a risk to the rating, said Friederich.
Commenting on efforts to build the economy, Fuzile said “a lot” of progress had been made in reducing energy constraints, which had held back the economy considerably over recent months. “We think that our resolution of that constraint could add anything between 0.8 and 1 percentage points to our growth.”
Investment in renewable energy projects involving partnerships between the public and private sectors had exceeded R200-billion. This form of partnership was being extended to the coal and gas sector and was at an advanced stage.
Presidency strongly condemns the toxic narrative in the media Absurd to say that the president would be engaged in a struggle
Fuzile said the government was aware of the importance of the manufacturing sector as it formed the basis of a modern economy and raised productivity levels.
He said the Department of Trade and Industry had produced a package of measures to support the steel industry, among others.
An aggregate of R16.2-billion had been allocated to incentives aimed at promoting various industries supporting SMMEs and co-operatives. See Pages 5 and 9 Comment on this: write to letters@businesstimes.co.za or SMS us at 33971 www.sundaytimes.co.za