Gigaba assures investors govt won't spend what it doesn't have

Cape Town – Finance Minister Malusi Gigaba reassured local investors on Thursday that government won’t spend money it doesn’t have and that National Treasury is committed to fiscal sustainability and consolidation.

He made a brief introduction ahead of a question-and-answer session hosted at Parliament during which local asset managers and investors could raise their concerns, saying that government aims to stabilise debt as a percentage of GDP at 50%.

“National Treasury is under pressure from colleagues in Cabinet to increase their budgets and allowances,” Gigaba said.

“We appreciate there are many priorities, but there are only so many we can accommodate. We have no desire to spend above the budget that has been allocated. We need to be able to fend them off to the extent that they must be accommodated in agreed fiscal consolidation.”

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Gigaba used South Africa’s intended nuclear build programme as an example where National Treasury would stick to the spending ceiling. “I need to reiterate: government’s procurement of nuclear will follow the (rules of the) Public Finance Management Act and the Constitution and only at a pace and scale that the country can afford.”

Fitch Ratings, which became the second ratings agency to downgrade South Africa’s sovereign credit rating to junk status on Friday, said in its explanatory statement that it was concerned about the country’s endeavours to procure nuclear energy, as it will place additional pressure on Eskom.

Under the finance ministry of Nhlanhla Nene, who was removed on 9 December 2015, National Treasury said Eskom could not absorb the nuclear programme with its approved guarantees at the time. 

Fitch feared that the pursuit of a nuclear build programme would increase Eskom’s contingent liabilities, which are already “sizeable”.

State-owned enterprises must be enablers of growth

Gigaba also said that he and National Treasury are aware that South Africa’s state-owned enterprises (SOEs) need to be managed well and be enablers of growth rather than a drag on the economy.

“Our SOEs need capable leadership, stable and capable boards and skilled executive directors.”

He said under the leadership of Deputy President Cyril Ramaphosa who steers an inter-ministerial committee on SOE reform direction will be given on matters such as private sector participation and the shareholder model at these entities among other things.

“Although National Treasury cannot impose itself on shareholder ministers (of SOEs), we’re committed to address issues, otherwise these entities won’t fulfil their capital expenditure mandates – especially those that are responsible for infrastructure,” Gigaba said.

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