CEO Initiative snubs talks with new finance minister

23 April 2017 - 02:02 By ASHA SPECKMAN
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The CEO Initiative refused to meet Finance Minister Malusi Gigaba this week before his trip to the IMF/ World Bank meetings in Washington, D.C. after 15 months of work aimed at averting a downgrade came to nothing when the shock cabinet reshuffle led South Africa into junk status.

The CEO Initiative will now meet in the next few weeks to determine what role it will play in future.

According to a note circulated among CEOs after the CEO Initiative steering committee meeting on Wednesday, the steering committee is furious about the nature and timing of events that led to the sovereign credit-rating downgrade to junk at the end of March.

Committee members believe they cannot continue with a "business as usual" approach.

The note, which Business Times has seen, was written by a senior executive in the CEO Initiative. It said: "We need to reflect on the lessons learnt and use these to reshape the ground rules and rules of engagement with the president, members of the cabinet and government."

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The steering committee agreed to call a meeting of all CEOs in the initiative to obtain a "refreshed mandate" regarding its future activities given the change in context.

There are about 100 CEOs from the retail, financial services, telecommunications and banking sectors in the initiative, which worked closely with former finance minister Pravin Gordhan to build confidence in the country and identify growth opportunities.

A meeting has tentatively been scheduled for the second week of May following the World Economic Forum's Africa chapter in Durban early next month.

S&P Global Ratings - which downgraded South Africa to BB+ on April 3, one level below investment grade with a negative outlook - said firing Gordhan as finance minister had "put at risk fiscal and growth outcomes" while policy shifts were likely and this could undermine fiscal and economic growth outcomes "more than we currently project".

In a panel discussion at Wits Business School this week, Gardner Rusike, an S&P director, said political infighting ahead of the ANC's elective conference later this year was likely to deflect the government from implementing reforms.

"You are probably looking at a much longer time line when you are talking about the path of economic growth that can help to stabilise debt," Rusike said.

South Africa's net debt hovers close to 50% of GDP or R2.2-trillion. The cost of servicing debt is one the fastest-growing budget items.

"There are risks that potential growth outcomes could be weakened, especially with uncertainty brought along in a year where you may not get strong decisions for strong reform programmes," Rusike said.

Gigaba met international investors and Moody's while in Washington, D.C. and committed to fiscal consolidation.

- Additional reporting Reuters

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