Cabinet approves Gigaba plan to tackle recession woes

Cape Town – Finance Minister Malusi Gigaba will soon meet with business leaders to formulate a strategy to counter the economic recession, Communications Minister Ayanda Dlodlo said on Thursday.

During a media briefing following the previous day’s Cabinet meeting, Dlodlo said Cabinet endorsed a full media briefing by Gigaba to share with South Africans the interventions to be made within the current budget framework.

Following Dlodlo's briefing, Gigaba told Parliament on Thursday that National Treasury will give clarity on key policy areas as well as timelines for their implementation so that markets can be reassured.

Gigaba also gave his commitment to "speedily respond" to the issues raised by ratings agencies and said government will do its utmost to stabilise public debt.

On Tuesday, Statistics South Africa announced that the country officially entered a recession when GDP contracted by 0.7% in the first quarter of 2017 – the second consecutive quarter of negative growth. Growth contracted by 0.3% in the fourth quarter of 2016.

READ: SA is in a recession: Here’s what that means

“This worse-than-expected GDP outcome is significantly lower than the 2017 Budget Review (delivered by former finance minister Pravin Gordhan on February 22), which projected growth at 1.3%,” the statement read.

Cabinet urgently called on business, labour and the broader society to partner with government to urgently address the decline in South Africa’s economy and improve confidence.

“South Africans must act in unison, especially during difficult times and work even harder to ensure that the country reclaims its investment grade status,” according to the statement.

READ: Save SA blames GDP shock on ‘recession president’ Zuma

Cabinet also mentioned the affirmation of South Africa’s long-term foreign currency debt ratings of BB+.

Both Fitch and Standard & Poor (S&P) Global kept South Africa’s sovereign credit rating unchanged at junk status in the first week of June and maintained their negative outlook.

There are fears, however, that the recession could give ratings agencies reason to downgrade South Africa’s domestic currency debt rating to sub-investment grade. Both Fitch and S&P have the domestic debt rating one notch above junk status.

READ: What you need to know about a recession

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