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Political noise has not deterred Team SA – Gordhan

Nov 29 2016 10:41
Lameez Omarjee

Johannesburg – Although the local economy has been experiencing lots of “political noise”, team South Africa is getting stronger, says Finance Minister Pravin Gordhan.

During a press briefing following a breakfast on the World Economic Forum 2017 in Johannesburg on Tuesday, Gordhan explained that there no country in the world that has political certainty.

He cited Brexit and the outcome of US elections as examples of a changing world.

He added that progress is being made in the South African economy.

“There are good things happening in the economy, but these good things aren’t scalable at this point. They’re not scalable to be seen in GDP numbers,” said Gordhan.

He added that South Africa should focus on growth, which was a concern raised by ratings agencies.

Minister of economic development Ebrahim Patel, who was also at the briefing, explained that demonstrating growth potential to ratings agencies is important. This shows why South Africa is a worthy investment destination.

Ratings agencies

Ratings agencies Fitch and Moody’s did not downgrade South Africa’s credit rating late last week.

Fitch’s rating for South Africa is one notch above junk at BBB- with a negative outlook. Moody’s rating for the country is two notches above junk at Baa2.

“We remained at investment grade… That is important” said Gordhan.

“The team delivered for South Africa, not as individuals.”

He added that stakeholders will wait on Standard and Poor’s (S&P) decision. S&P’s rating is currently at BBB- with a negative outlook.

On economic growth, Patel said: “We have got to look for opportunities for domestic growth, boost our economy and performance and not rely on global tailwinds. We need to create our own tailwinds and navigate the global headwinds.”

Among the practical steps to be taken to reflect South Africa’s growth narrative, Patel explained that the investment in infrastructure must be strengthened.

Infrastructure development requires the reliable supply of energy for the long term, which is a period of 10 to 15 years. Furthermore, government plans to invest R987bn in energy.

The country will also work on creating an open economy by changing competition policy.

“Competition policy is critical,” he said.

In May, it became a criminal offence to collude or operate as cartels. He added that it is important to create opportunities for new players.

Another area to address is to “nurture opportunities” for investment. The Industrial Development Corporation (IDC) in the last 12 months approved a R14.5bn investment.  

Patel said the collaboration in the labour market to create stability will ensure economic benefits for all. Finally, he added African integration is also important. South Africa will work on exporting more finished goods throughout the continent in the next few months.

Even though these are steps taken to avoid a credit downgrade, Patel said that this was important to achieve for the South African people so as to ensure inclusive growth. 

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