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Cape Town – Finance Minister Pravin Gordhan said specific steps were being taken to implement key state reform measures in a bid to stave off a long-term ratings downgrade.
LATEST: A feared credit downgrade for South Africa to "junk" could see direct investment in the ailing economy slide further as investors flee to other markets in search of higher returns. FULL STORY
“There are fairly significant areas of reform as far as energy supply is concerned, labour relations (and) the management of our state-owned entities,” Gordhan explained. "There are practical steps being taken at the moment (to implement these reforms)."
Speaking to Bloomberg in Paris on Wednesday, Gordhan said a ratings downgrade to junk status by Standard & Poor’s (S&P) on Friday would not speed up the exit of investment in the country.
“I think we have done enough to pass the June hurdle so to speak and in the next six month we have to do more,” he said.
WATCH: Full interview with Gordhan on SA and global economics
“I think we’ve done enough on the fiscal side over the next three years to get to a primary surplus in the outer years of our three-year planning cycles,” he said. “We’ve demonstrated our commitment to fiscal consolidation is one that we will carry through.”
Gordhan pointed to the nine-point plan as government’s main road map. “I am confident that we will have both the space and momentum to get things done,” he said.
READ: Upbeat Gordhan hopes for ‘better times’
He pointed out that business confidence is “obviously crucial” to attract investors.
He said labour, business and government have been “working together to create the right kind of … cooperation, which will lead to better trust relations … and creating the right kind of business confidence for investors, built by South African businesses and foreign investors as well.”
He said this process was crucial to “demonstrate both to ourselves and our own citizens and investors and rating agencies that we are serious about placing South Africa on a different growth path”.
S&P and Fitch both rate South African debt one level above junk, with negative outlooks on its BBB- assessment.
A downgrade in an already ailing economy will signal a riskier investment climate and will have dire consequences for borrowing costs, foreign direct investment and employment.
