Zuma pledges to avoid junk credit rating

President responds to Sona debate in Parliament on Thursday.
South African President Jacob Zuma pledged to keep spending under control and to work with business leaders and labor unions to ensure the nation retains its investment- grade credit rating.

“High up on our agenda is to prevent a sovereign downgrade,” Zuma told lawmakers in Cape Town on Thursday, following a debate on his annual state-of-the-nation address. “Stronger measures to restore a sustainable fiscal path have been endorsed at the highest levels of government. Since we cannot change the global economic outlook, we will focus on correcting domestic circumstances that have affected confidence in the economy.”

Standard & Poor’s ranks South Africa’s debt at the lowest investment grade, and has a negative outlook on the rating, indicating a possible downgrade to junk. Moody’s Investors Services cut the outlook on the nation’s Baa2 credit rating, the second-lowest investment grade, to negative in December.

Zuma and his Finance Minister Pravin Gordhanhave sought to restore confidence in the economy as a commodity-price slump, weaker demand from China and the worst drought in a century damp growth. The shock firing of Nhlanhla Nene as finance minister in December rattled markets, sending the rand and bonds plunging.

Zuma and Gordhan have held four meetings with chief executive officers since mid-January to discuss ways of shoring up the economy and reviving growth.

“We are happy with the support of business as they are a key stakeholder in the path we have undertaken,” Zuma said. “I will meet again with the CEOs of top companies to take stock of progress in May. We will be meeting labor very soon to take the discussions forward, towards re-igniting growth and creating jobs.”

The government’s economic blueprint is the National Development Plan, which aims at bolstering the economic growth rate to more than 5% by 2019 and halving a 25.5% unemployment rate. Drawn up by a panel headed by former Finance Minister Trevor Manuel, it calls for a reduction of red tape and a review of labor laws to make it easier for companies to hire and fire workers.

“The implementation of the National Development Plan remains the cornerstone of our economy,” Zuma said. “It provides a basis for collective actions required to stabilize the economy, build confidence, raise the level of investment and return South Africa to a path of inclusive economic growth.”’

©2016 Bloomberg News

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