South Africa’s Treasury has a lot of work to do to maintain the nation’s budget and spending framework, Finance Minister Malusi Gigaba said.
“In the period in which we are, where the revenue targets are obviously not going to be met, yet the expenditure ceiling remains in place, we will need to implement both revenue side and expenditure side measures that are going to assist us to achieve our budget targets and spending priorities,” Gigaba said in an interview with Bloomberg Television in Washington D.C. on Thursday.
While Africa’s most-industrialized economy emerged from a recession in the second quarter, Gigaba’s mid-term fiscal statement on October 25 may show revenue collections which are hamstrung by weak economic growth. The budget deficit could swell to 4.5% of gross domestic product in the current financial year, compared with the 3.1% shortfall the Treasury forecast in February, the central bank said last week.
We “understand that the South African economy is in a difficult period at the present moment,” Gigaba said. “We have identified structural reform programmes that we need to implement in order to drive growth” and ensure we continue with more fiscal consolidation.
A deterioration in the fiscal consolidation path could see assessments by Moody’s Investors Service and S&P Global Ratings of the country’s local sovereign debt cut to non-investment grade next month. S&P and Fitch Ratings cut the nation’s foreign-currency debt to junk after President Jacob Zuma changed his cabinet in March and appointed Gigaba as finance minister in the place of investor-favorite Pravin Gordhan. The ratings companies cited policy uncertainty.
Gigaba said the Gupta family, who have been accused of using their relationship with Zuma to influence government appointments including cabinet positions and the awarding of state contracts, isn’t influential in government.
“Investors need to be comfortable that government is doing all it can to fight corruption and to ensure that we run a clean and ethical state,” he said. The government and the ruling African National Congress will make sure all instances of so-called “state capture” are investigated, he said, using a local term to describe undue influence private interests allegedly wield over the government.
The ANC will choose a new leader in December when Zuma steps down and at least six candidates, including Deputy President Cyril Ramaphosa and Nkosazana Dlamini-Zuma, former African Union Commission chairwoman and Zuma’s ex-wife, are vying for the position. Gigaba said whoever becomes the new party president will continue implementing current ANC policies.
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