Gordhan warns of financial shockwaves

Jun 18 2013 21:40

Cape Town - South Africa's revenue outlook could dim further if markets reacted adversely to an awaited announcement by the US Federal Reserve, Finance Minister Pravin Gordhan warned on Tuesday.

"In respect of the revenue outlook in relation to the current economic growth that we are experiencing... we are today facing more difficulties than anticipated.

"[This is] partly because of the very uncertain and volatile environment that we are experiencing globally, which could become worse when the chairperson of the Federal Reserve of the United States addresses us," Gordhan told the National Assembly during the debate on the 2013 Appropriation Bill.

Federal Reserve chairperson Ben Bernanke is expected to indicate on Wednesday whether the US central bank will taper off its massive quantitative easing programme, which was designed to boost the recovery of the US economy.

"It is likely that if the markets don't like what he is saying or interpret what he is saying in a particular way, that could introduce shockwaves very similar to what we experienced about two weeks ago in the financial markets around the world, so prepare ourselves for that.

"All these uncertainties actually introduce uncertainty around the revenue picture," Gordhan added.

Two weeks ago, the rand fell to a four-year low against the dollar. The US currency has strengthened in recent weeks, raising expectations that the Federal Reserve might start retreating from its bond-buying stimulus programme.

The debate on the bill putting into effect Gordhan's R1.1trn 2013 budget was often acrimonious, with opposition parties criticising the performance of one department after another.

Rising on the finance ministry's budget, Democratic Alliance finance spokesperson Tim Harris said it was not legitimate to blame the volatility of the rand and South Africa's bleak growth outlook on quantitative easing.

Harris said the DA would vote for the department's budget this year, but threatened not to do so in future if Gordhan were to bow to pressure from the ANC's left-wing allies on fiscal policy.

Gordhan dismissed the criticism on finance policy as electioneering.

"As we get closer to elections, the temptation for fabrication becomes quite strong," he said.

"The ANC, for the past 19 years, has led this country extremely well in terms of the fiscal management of this country... There is no piece of fact that anybody can produce anywhere in South Africa that can accuse the ANC of being profligate, of being irresponsible, of not responding timeously to the events around us.

"We can't be subjecting our public to the DA model of neo-liberalism and laissez-faire, which they want to cast upon South Africa."

All opposition parties refused to support the presidency budget, in effect turning this vote into one of no confidence in President Jacob Zuma, with DA parliamentary leader Lindiwe Mazibuko saying South Africa could not afford another term of "leadership failure".

Congress of the People leader Mosiuoa Lekota said he would not vote for the state security budget in protest against the Protection of State Information Bill which is awaiting the president's signature.

Lekota said former president Nelson Mandela would never have signed the bill because it was a setback for freedom of speech.

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