South Africa will unveil a stimulus package focusing on tourism and manufacturing to turn around the economy, finance minister Malusi Gigaba said on Friday, following a budget speech this week that raised the risk of credit downgrades.
In a speech to investors, Gigaba said Treasury would not wait for the ruling African National Congress’s leadership conference in December to take the “drastic decisions” needed to grow the economy and maintain fiscal consolidation.
Political uncertainty has persisted ahead of the ANC conference where the party will elect a new leader to succeed President Jacob Zuma, who is battling several scandals, including corruption allegations. Zuma denies the accusations.
“We cannot be hamstrung by what is going to happen in December. We have an obligation to ensure the economy continues functioning,” Gigaba said, adding that concrete steps to grow revenue would be announced in the February budget.
In his budget speech on Wednesday, Gigaba said the country’s fiscal deficit for this year was forecast to widen to 4.3% of gross domestic product due to a more than R50 billion ($3.5 billion) revenue shortfall.
He also slashed the growth estimate to 0.7% from 1.3%.
The dire budget forecasts have triggered a selloff of the rand, bonds and financial shares and also raised the stakes ahead of S&P Global Ratings and Moody’s November 24 credit rating reviews of the junk grade-threatened country.
On Thursday Fitch, which already rates South Africa’s local and foreign debt non-investment, warned that Treasury was straying from fiscal consolidation, while S&P said politics were the main hurdle to arresting the fiscal slide. ($1 = R14.30)