JOHANNESBURG – South Africa’s finance minister has sought to allay investor fears over his pledge of “radical economic transformation”, toning down the rhetoric just over a month into the job to talk more of “inclusive growth”.
Malusi Gigaba, appointed after President Jacob Zuma sacked his predecessor Pravin Gordhan in a move that rattled markets, has backed Zuma’s aim of redistributing wealth to poor blacks.
While investors want the ruling African National Congress (ANC) to explain what is meant by radical transformation, Gigaba has in recent speeches used language that appears aimed to calm nerves, without specifying any concrete policies.
Gigaba dismissed calls from one adviser to nationalise banks and mines and he told parliament’s finance committee on Tuesday the objective was to help poor blacks, whether the transformation was “called accelerated growth, radical economic transformation or inclusive growth”.
“His view is that investors in business should not be fearful when they hear the word radical and think that it means there is going to be some irresponsible approach to government programmes,” Gigaba’s spokesman, Mayihlome Tshwete, said.
“And on the other side those who hear inclusive growth should not feel that it’s a business term that doesn’t relate to the masses of the people.”
BNP Paribas Securities South Africa economist Jeffrey Schultz noted the change in rhetoric.
“He is trying to calm fears…that it doesn’t necessary mean there is going to be far-reaching changes in the way fiscal policy is conducted,” Schultz said.
“Radical economic transformation sounds so alarming to the investment community and the term inclusive growth seems on the face of it a little bit more palatable.”
South Africa’s credit rating was cut to “junk” after Zuma sacked Gordhan. Lower ratings typically make it more expensive to borrow and risk deterring the foreign investors on whom South Africa relies to finance its big budget deficits.
In a country where unemployment is 26.5 percent, hundreds of people in townships protested this week over housing and jobs, piling pressure on Zuma who has faced calls to step down since the reshuffle.
Some analysts said talk of “transformation” was meant to appease ANC supporters after the party lost key cities – including the capital Pretoria and economic hub Johannesburg – at local elections last year.
“I think that it is the rhetoric of desperation when you have a hollow buzz phrase like that without any substantive detail,” said Martyn Davies of Deloitte.
But a cabinet minister said transformation was at the heart of the ANC’s policies.
Minister in the Presidency Jeff Radebe told reporters on Tuesday that “radical socio-economic transformation is not an invention of 2017. This matter arose in 2012 at the ruling party conference…and is in the national development plan.”