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Treasury: 3 concerns of investors, rating agencies

Cape Town - Economic growth, fiscal policy and politics were the top concerns raised by investors and rating agencies during National Treasury's brief post-budget investor roadshow.

The week-long trip lasted just eight hours after President Jacob Zuma instructed Finance Minister Pravin Gordhan to immediately return to South Africa from the UK.

"The meetings commenced at 10am and ended at 18h00 before the team headed for the airport to catch their flight back home," National Treasury said in a statement on Tuesday.

FULL STATEMENT: Gordhan's eight hours in London

Gordhan and his delegation had five face-to-face meetings with sixty representatives with fund managers from BlackRock, T.Rowe, Aberdeen, Eaton Vance, Vanguard, Investec, Metlife and Apollona, and 28 investors in a combined lunch. They also met rating agencies Fitch and Moody’s and had a teleconference with Standard & Poor.

"The meetings are part of the normal course of business of the Treasury’s effort to keep both rating agencies and investors informed about fiscal and monetary policy developments, more specifically and about topical contemporary policy issues in SA."

Treasury said the questions from both investors and rating agencies revolved around three aspects.

Economic growth - "Investors enquired about the achievability or otherwise of growth forecasts and government, business and other partners’ efforts towards achieving faster and more inclusive growth."

Fiscal Policy - "While broadly commending the budget, investors wanted to know whether there was still scope to adjust both revenue and expenditure sides of the budget in the event that the fiscal targets are likely to be missed materially."

Politics - "Investors expressed concerns about the political environment and the risk that it could divert attention from setting policies aimed at accelerating growth and creating more work opportunities. They were also curious about the processes leading to the policy conference of the governing party and the electoral conference in December."

Treasury noted that this information is crucial for investors to commit the funds under their management by buying South African government bonds and form their opinions about SA’s credit worthiness and thus to pronounce on the country’s rating.

"The ratings in turn determine the cost at which SA will borrow the R730 billion it will need to meet its borrowing requirement for the next three years."

Treasury said government on a weekly basis needs to borrow more than R13bn in the domestic market. It said of government’s total borrowing requirement, $6bn needs to be raised in the international market over the next 3 years to partly meet government’s foreign commitments.

"This is money that will contribute towards the building of public infrastructure – roads, schools, health facilities, etc - to deliver better public services to the 55 million South Africans," it explained.

Treasury said one of the clear benefits of the roadshows is that, South Africa is one of very few countries that do not have to meet investors before issuing an international bond.

"In other words, the South African government is able to raise amounts as high as USD3 billion within a matter of 3-5 hours. This has been the case for the last 5 year now."

On his way out?

When Gordhan landed in the country he went to Luthuli House, where he is assumed to have been given his marching orders by Zuma.

This despite speculations that should he drop the axe on Gordhan, there would be resignations en masse led by Deputy President Cyril Ramaphosa, with Health Minister Aaron Motsoaledi and Tourism Minister Derek Hanekom also leaving his Cabinet but remaining as members of Parliament, reported News24.

READ: Gordhan crackdown: Chaos, confusion and Cyril

Media reports claim the national executive committee (NEC) endorsed Zuma's alleged decision to fire Gordhan. This came in the wake of earlier reports that Zuma informed the South African Communist Party of Gordhan's sacking, reported Bloomberg.  

The SACP forms part of the Tripartite Alliance with the ANC and the Congress of South African Trade Unions.

More on the roadshow

The roadshow was scheduled to take place in two phases. The first phase was set to take place in London on 27 and 28 March. Gordhan was leading the delegation, which also comprised of Jabu Mabuza of Business Leadership South Africa and Business Unity South Africa, Nicky Newton-King of the JSE. George Sebulela from the Black Business Council could not make it due to logistical challenges.

National Treasury said as in the past international roadshow held late last year, leaders of the three labour union federations – COSATU, NACTU and FEDUSA - were also invited to attend. The Reserve Bank delegation which also traditionally joins the roadshows could not be part of it because of the planned Monetary Policy Committee meeting.

The second leg of the roadshow was intended to be in the United States, to be led by the Deputy Minister Mcebisi Jonas. However, this trip was subsequently cancelled before he travelled.

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