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Gordhan sounds warning on SOE financial health

Jul 29 2016 11:13

Johannesburg - Finance Minister Pravin Gordhan said on Friday that the domestic and global growth outlooks remained bleak and sounded a warning about the financial health of state-owned companies, which include power utility Eskom.

"As a country we are operating in a global environment that is not going to see growth of 4.5 or 6 percent for a long time to come," Gordhan told a job creation summit in Johannesburg.

Africa's most advanced economy narrowly avoided downgrades to subinvestment status in a round of reviews by the three major ratings agencies in the first half of the year, but is teetering on the brink of recession.

The economy contracted 1.2% in the first quarter as mining shrank and a severe drought took its toll on agriculture.

Gordhan said the country needed to boost investor confidence by reducing uncertainty in economic policy and improving governance at state-owned firms.

"State-owned entities have guarantees to the tune of just over half a trillion rand with the state," Gordhan said.

"The key concern that ratings agencies and others would have is that as a result of levels of mismanagement, those guarantees shouldn't be called out at any stage."

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