South Africa is at risk of becoming a “kleptocracy” if business ethics don’t improve, Finance Minister Pravin Gordhan said.
“There are many parts of transacting between government and business which have gone seriously wrong and if we don’t stop it, we’re going to become a kleptocracy,” Gordhan said at a post-budget breakfast in Cape Town on Thursday. “Government and the private sector in South Africa must change the ethical system.”
Gordhan is seeking to restore policy credibility in an economy hit by falling commodity prices, the worst drought in more than a century and sliding investor confidence in President Jacob Zuma’s administration. Opposition groups have raised concerns about the growing political influence of wealthy business people, such as the Gupta family, who are personal friends of the president.
“We need to change the business culture in South Africa,” Gordhan said. “What has happened to honesty and integrity in business?”
Gordhan delivered a budget on Wednesday that aims to curb the state wage bill and will raise taxes on wealthy individuals to help narrow the budget deficit to 2.4% of gross domestic product in three years time from an estimate 3.9% this year.
“Money isn’t the problem in South Africa, it’s how we spend it that’s the problem,” Gordhan said on SAfm radio on Thursday. “There is far too much corruption.”
The government is seeking to improve governance at state-owned companies, many of which are facing financial difficulties and management struggles. Companies such as Eskom Holdings and the Post Office need to be more self-sufficient, with stronger management boards, Gordhan said.
© 2016 Bloomberg