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Cape Town – Finance Minister Malusi Gigaba said he will not be hamstrung by the ANC leadership battle ahead of its elective conference in December, pledging to implement a stimulus package in the tourism and manufacturing sector to spark economic growth.
He was speaking to investors at a JSE-hosted event in Cape Town on Friday.
“There are very serious decisions we need to take,” he said. “Those serious decisions need to be taken in the context of the impending ANC elective conference.
“Some people have said we have kicked the can down to next year,” he said. “But we are going to take decisions, including prior to the ANC conference.
“Whoever the ANC leader is, they will not want to inherit a wasteland,” he said.
“We cannot be hamstrung by what is going to happen in December. We have an obligation to ensure the economy continues functioning.
“We will announce a stimulus package to get the tourism and manufacturing sectors to assist the economy to grow and move forward.”
Gigaba was speaking two days after he presented government’s mini budget, where he revealed economic growth was projected to slow to 0.7% this year from 1.3% forecast in February Budget.
He also revealed that the fiscal deficit would widen to 4.3% of the gross domestic product due to a R50bn shortfall in tax revenue.
“We painted a gloomy picture,” Gigaba told investors. “We had to tell the country the truth and open the books to let them know what the situation is.
“It was important to give signals that, in light of the difficult conditions that we are and given the huge revenue shortfalls we will experience this year, if we leave the situation as it gross national debt will surpass 60% (about R3.4trn) of GDP by 2021.”
That picture sparked a sell-off of the rand, sending it to an 11-month low of over R14.25 to the dollar on Thursday.
There was also a major sell-off in bonds: “Panic drove bonds higher, with the R186s moving from 9.20 to 9.40 in a matter of hours,” said Rand Merchant Bank analyst Michelle Wohlberg on Friday.
The market reaction sparked fears that rating agencies S&P and Moody’s would downgrade South Africa’s local currency to junk status. They have already downgraded the country’s foreign currency.
Fitch Ratings, which downgraded both currencies in April, issued a warning about a shift in the country’s fiscal framework, after Treasury said it would breach the ceiling by R3.9bn if they don’t sell assets to offset the shortfall.
“We can’t exceed the expenditure ceiling,” Gigaba said on Friday. “We need to continue to identify programmes in government we need to postpone, stop or reprioritise.”
Treasury is looking at selling a portion of its R13bn stake in Telkom as well as other assets to sell that will enable it to remain within its fiscal ceiling.
“For us to implement these decisions, we will have to take drastic decisions,” said Gigaba. “It will require bold and decisive leadership.
“It is not just sufficient to cut travel, accommodation and catering costs as we did in the past,” he said. “We need to identify other measures.”
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