Treasury committed to fiscal consolidation plans outlined in budget‚ Gigaba assures investors

Finance Minister Malusi Gigaba says Treasury is committed to fiscal consolidation plans outlined in the 2017 budget‚ while answering investors call for clarification on what the ANC means by “radical economic transformation".

Speaking to local investors at the Development Bank of South Africa‚ after ratings downgrades by S&P Global Ratings and Fitch in the wake of President Jacob Zuma’s axing of Pravin Gordhan as finance minister in a midnight Cabinet reshuffle‚ Gigaba said the Treasury aims to stabilise the government’s net debt over the next three years at 50% of gross domestic product (GDP).

“To accomplish this we are tightly controlling expenditure‚” Gigaba said.

“Fiscal sustainability is a prerequisite for inclusive development ... we are therefore committed to the fiscal consolidation plans as outlined in the February budget.”

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Gigaba’s comments came as Mathole Motshekga‚ a NEC member and former parliamentary chief whip of the ANC‚ said the increasing public demands for Zuma to quit were harming South Africa. He wrote to ANC Secretary-General Gwede Mantashe requesting an urgent meeting of the ANC National Executive Committee to discuss it.

“There is unrest in the country‚ and it is affecting civil and business life‚ so it is important that the matters that have been placed on the agenda be attended to quickly so that society can return to normalcy and people must go on with their work‚” said Motshekga.

Gigaba also said the sense from the investors was that government needed to explain in detail what it meant by radical economic transformation.

“What I assured them is that when we talk about inclusive growth and the package of policies‚ it’s exactly the same programmes that we all are concerned about — to create jobs‚ to address poverty‚ to address inequality. We want programmes that are going to include as many people who are excluded from economic participation as possible‚” Gigaba said‚ adding that there was no disjuncture between growing the economy and fostering inclusive growth.

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“Everything we do must address the fundamental need to grow the economy and grow it inclusively ... because ultimately what we need is accelerated growth.”

Gigaba said his team would have international roadshows to engage with credit rating agencies and investors abroad.

However‚ economist Dawie Roodt said it was difficult to understand what “radical economic transformation” meant.

“It probably means state and government want to be in charge of more things. They want to get hands on more land‚ they want to get involved in banks and businesses‚” Roodt said.

Roodt said the challenge for the minister in his planned international roadshow was not telling investors what government planned to do but show them what it was doing.

“They have to show investors what are they doing about fiscal deficit‚ what they are doing about nuclear spend and how they are managing state-owned enterprises‚” Roodt said.

Economist Dr Azar Jammine said Gigaba’s pledge to pursue “radical economic transformation” while maintaining fiscal discipline appeared to be incompatible in the absence of savings through the elimination of corrupt practices.

- Additional reporting by Reuters and Bloombergs