Don't blame me for junk, says Gigaba

Moody's might downgrade South Africa's sovereign credit rating in coming weeks despite the best efforts of the Treasury, Finance Minister Malusi Gigaba said this week.

Such a downgrade to subinvestment status - which could knock South Africa off further world bond indices while raising government, private sector and consumer borrowing costs - is Gigaba's next looming challenge as much as his concern to steer the country on a path of economic growth and a return to investment grade status.

"If Moody's takes a decision to downgrade us it would not be because we have failed to convince them," he said.

"It would be because they are saying they are still not sure about whether we are going to have growth in the South African economy, about whether the uncertainties at policy level are going to be addressed, about whether the South African government is going to maintain fiscal discipline."

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A downgrade by Moody's "cannot be about the [cabinet] reshuffle because that has happened", Gigaba said.

He was speaking on the sidelines of the World Economic Forum on Africa in Durban, where the theme was "Achieving inclusive growth through responsive and responsible leadership."

Moody's put South Africa on review last month for a downgrade within a 30-to 90-day window period. This followed decisions by S&P Global Ratings and Fitch which downgraded the sovereign foreign-currency credit to junk.

This came after the cabinet reshuffle at the end of March and ousting of the former finance minister Pravin Gordhan and his deputy, Mcebisi Jonas.

"The downgrades cannot be attributed to me. To do that is grossly unfair and actually opportunistic - the ones that have happened.

"In actual fact, South Africa had been on a downward slope largely because of structural problems in the economy and certain policy uncertainties that caused anxiety among investors and the ratings agencies."

He had meetings with Moody's and bond investors during his trip to the IMF/World Bank Spring Meetings in the US more than a week ago.

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Of greatest concern for investors was the country's growth trajectory. "Nobody can give them the assurance that there will be growth until that growth takes place.

"What we can do is give them the guarantee that we will pay singular attention to driving growth in the South African economy. It is only an extreme shock that will prevent us from growing. We are going to grow."

Speaking on the sidelines of the Motor Industry Staff Association business brunch on Friday, Gordhan said whether or not Moody's downgraded the country, "the approach one has to take is whatever is going to happen, is going to happen ... you can worry about it, but that's not the issue. The question is what do you do about it?"

Once we had that reality understood, he said, "we've got to ask ourselves what is within our control to do, what is the plan that we actually have, and can we muster the collective will to implement that plan to start moving us out of the situation we find ourselves in.

"So we can spend a lot of time asking ourselves: 'Why are we here and commiserating with one another', but the most important thing now is what do you do about it because you've got to start inspiring confidence within the country."

In February, the Treasury projected growth of 1.3% for this year, compared with the IMF forecast of 0.8%.

Gigaba said: "What matters is that we must change the structure of production in the economy, and we must change the patterns of ownership by implementing these structural reforms that address these issues."

This was his explanation for his call for inclusive growth since taking the helm. He said the tenets to this were already contained in a nine-point plan for economic growth that President Jacob Zuma had announced previously. This concerned structural reform and industrialising the economy, while also building a "vibrant" small and medium enterprise sector.

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The government has, however, not provided clear timelines.

In the US, investors and the ratings agency also raised concerns about policy and commitment to the fiscal framework.

Gigaba said the government was "far ahead with this budget. There can be no review of this budget." Pressures such as the demand for funds to cut fee increases for struggling tertiary students would result in reprioritisation of existing funds.

"But at the present moment there is no such pressure."

Financial challenges at state-owned companies such as PetroSA - where the directors were reported this week to have recommended business rescue - would be addressed within the scope of the available budget.

Gigaba could not comment on PetroSA as he had not yet received a formal approach.

He said he was concerned about the governance of state-owned companies that had to be addressed urgently, including the strength of their balance sheets.

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Companies he listed were Denel, Eskom, SABC and SAA.

The finance minister said he expected to be briefed by teams in the Treasury about "a number of issues" when he returned to his office this week and he was also awaiting the outcome of work conducted by the state-owned companies reform committee under Deputy President Cyril Ramaphosa.

Last week, Zuma signed amendments to the Financial Intelligence Centre Act. A consultative process succeeded by the development of regulations over coming weeks will follow.

Gigaba said that concerns - some expressed by the DA - about his ability to implement the act aimed at curbing fraud and money laundering were "misplaced".

"We are going to ensure that the regulations are established and implementation takes place."

- Additional reporting by Palesa Vuyolethu Tshandu