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Foreign investors want ‘concrete action’ in coming months, says Gordhan

Minister held ‘constructive interaction’ with ratings agencies on recent road show.

JOHANNESBURG – South Africa needs to provide “concrete evidence” over the next few months of how it is addressing issues that worry foreign investors and ratings agencies, if it wants to convince them that it is not “just talking”, finance minister, Pravin Gordhan told journalists on Monday.

Gordhan last week led a delegation, which included representatives from government, business and labour, on an investor road show to discuss the Budget Review and latest economic developments in the country.

Businessman Christo Wiese and CEO of the JSE, Nicky Newton-King, were among those who joined the delegation, which met with more than 250 foreign investors across London, Boston and New York who collectively manage several trillions of dollar assets. Among them were some of those who government owes in excess of R600 billion, with gross government debt currently around R2 trillion.

Foreign investors queried a number of political hot potatoes, including the unceremonious removal of former finance minister, Nhlanhla Nene; labour instability; and the drag of state-owned enterprises (SOE) on government finances.

Gordhan said there is “a global awareness” of our economy and that the economy and South African society needs to win back credibility. He said investors wanted to know where economic growth was going to come from.

According to Gordhan, Treasury will be scrutinising government programmes to establish “what we really need to spend money on in government if circumstances around us don’t change” – i.e. if economic growth and revenue don’t increase.

“Government has a lot of space to cut expenditure further if needed,” Gordhan said.

He said government would “rationalise” many smaller SOEs, particularly where there is duplication, while attending to governance and financial stability issues in each of the “major ones we are dealing with”, so that they can operate on the strength of their own balance sheets.

On Nene, Gordhan said, “All they [foreign investors] want are indications of stability and we assured them as Treasury that we are here to do a piece of work and we will continue to do a piece of work as long as we can and will serve the country as long as required”.

Deputy Reserve Bank governor, Daniel Mminele said that, following the events of “9/12” (December 9 2015), investors asked questions around central bank independence and “those fears could be allayed”.

President of Business Unity SA (Busa), Jabu Mabuza, who has spearheaded interactions between business and government in recent months, said that business-government working groups would provide reports to the President – on concrete steps to boost small businesses and industries such as manufacturing and tourism, for example – by May.

Ratings

“The interaction with the ratings agencies, including senior people from Moody’s, was an extremely constructive interaction and one I hope will mean that we will be given some breathing space to demonstrate that we can concretely take South Africa’s economy in a very different direction,” Gordhan said.

Moody’s, which has us two notches above junk, arrives in South Africa on Wednesday to begin its review of the country’s credit rating.

Gordhan said that while investors did raise the issue of a credit ratings downgrade, some said that they don’t take ratings agencies seriously and have their own country analysis.

If South Africa gets downgraded to sub-investment grade by one of the agencies, its “plan B” would be to “get upgraded”, Gordhan quipped, acknowledging this was not a simple thing to do.

Fitch and Standard & Poor’s cite six to eight years as the average time taken four a country to regain investment grade status.

Chairperson of Barclays Africa, Wendy Lucas-Bull, who accompanied the delegation, said the resounding message from investors and rating agencies was that the Treasury, Reserve Bank and Minister had enormous respect and “this was not to be underestimated”.

According to Lucas-Bull, the Minister made a “critical decision to take this trip at this time”. “We can’t underestimate the urgency with which these issues need to be dealt with, this could not be delayed,” she stressed.

Gordhan said that foreign investors still have confidence that there’s a leadership team inside and outside government with the ability and resources to move the economy to higher levels of growth.

“The time is now for South Africans to show similar confidence in the economy and demonstrate that we are capable of working together and I’m sure we are,” Gordhan said.

Launched at the weekend, the Socio-economic Future of South Africa (Sefsa) aims to encourage dialogue between civil society actors and has been endorsed by religious, business, labour and government leaders.

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SA is doomed under ANC rule because of the lack of education in leadership and supporters! I don’t think they give a damn about “ratings”, as long as they get their demands met for more money and “statues that must fall” and “free education”, and “Afrikaans must fall”, and the satisfaction of burning and breaking property, that they actually need, to get educated!! They haven’t a clue what damage they are causing!! And we all know that our UNesteemed prezzie ZOOma hasn’t a clue that he caused a slump in the rand and a lot of economic damage all on his own!! And the world watches and giggles!!

Leslee, if you think about it, in life/society people have the same needs. What is different is the “urgency” of those needs or primary-vs-secondary needs.
It is an urgent or a primary matter to one with investments to be concerned about ratings decision; a matter that would be secondary or less urgent to one without investments.
” as long as they get their demands met for more money” as you put it, is a primary matter to those without money.
What, one supposes, is needed is an understand of the “forces at play” at different times under different circumstances for different groups of people. A lack of such an understanding make people to think they have more different needs than otherwise.

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If only the majority of these ANC ministers were capable of reading and understanding life. It should be every ministers required reading to fully understand Maslow’s hierarchy of needs and governed according to that rather than applying the principles to their own selfish lives, and don’t give a fig for the population

Gordhan and others with a modicum of intelligence (there are some) should go directly to the glorious leader’s office and request him to move aside as he is the elephant in the room. This country cannot go forward with him at the helm. International investors should be demanding this as a non-negotiable. “For evil to flourish, all that is required is for good men to do nothing.” (Burke)

However highly one thinks of Gordhan, certain facts remain; which are:
-Gordhan, in person, is an appointee of the president.
-Gordhan, in person, cannot remove the president of a republic.
-Gordhan, in person, is NOT a factor to the ratings agencies’ process.
-Zuma, in person, is NOT a factor to the ratings agencies’ process.
A little perusal of the constitution can shed some light on the first to points.

Given that ratings agency rate only[mainly] foreign currency denominated debt. The question is, what is the government’s foreign currency denominated debt as a percentage of total government debt? I’d like to believe SA government’s debt is largely in rands.

Yes, I exclude corporate debt because a corporate can have a higher rating than the country in which it operates.[ E.g. As per S&P, USA government is less AAA and yet corporates Johnson&Johnson and Microsoft have AAA]

The point here is, the catastrophe that many/some predict/hope-for may be more in the mind than in reality. Of course, this in no way underplays the importance of ratings agencies’ decisions.

Lastly, it is important to note that it was not as a result of ratings agency that international investors bought SA debt but as a result of the inclusion of SA bonds in the Citigoup’s World Government Bond Index (WGBI).

When it’s obvious to all and sundry it’s obviously wrong.

[in jest] Buy gold because the dollar is going to the dumps. Still waiting….sigh…

In the words of RW Johnson:

“South Africa can either choose to have an ANC government or it can have a modern industrial economy. It cannot have both.”

There’s nothing more one needs to add to that.

The ANC has never been accountable to anyone or anything except its own self interest and internal churn.

The notion that now it will hold itself accountable to the demands of global economic forces is laughable.

After all the sexist and racist remarks uttered by Jacob Zuma, it will be a European lady that will eventually rub his face in the mud. Christine Lagarde is watching silently, and waiting patiently for her chance to move in, and enforce sound economic policy through an IMF bailout.

“foreign investors want concrete action in coming months” says Gordhan.

Uhh, Prav, concrete action was sort of what everyone was expecting out of your budget speech, which you didn’t give us, didn’t any of the investors ask you why you didn’t do more ?
(They probably did, but he won’t kiss and tell)

I can’t help but think Nhlanhla Nene would’ve “taken the bull by the horns” and taken more drastic and meaningful thogh unpopular steps..

Agree but if zoomer hadn’t sacked Nene, we perhaps would not be in such a dire situation. And now the Hawks (i.e vultures) are going after PG with guns blazing because he hasn’t answered their questions? Who, I wonder, formulated the questions. Zoomer, van Rooyen perhaps?

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