JOHANNESBURG – South African investors want the ruling African National Congress to explain in detail what the “radical economic transformation” it has pledged in recent speeches means, Finance Minister Malusi Gigaba said on Wednesday.
President Jacob Zuma has said he will redistribute wealth in the economy – still largely held by a white minority – to poor black people, a call echoed by Gigaba since he was named finance minister in a shock cabinet reshuffle last month.
However, there were few concrete policies on how this will be achieved, and Zuma’s transformation push has been criticised by opponents who say it echos populist promises made by the ruling party since the end of apartheid in 1994.”
“The sense from the investors is we need to explain in detail what we mean by radical economic transformation … we don’t want to create a disjuncture between growth and development,” Gigaba said after speaking to local investors at the Development Bank of South Africa.
Last week Fitch downgraded South Africa’s foreign and local currency debt to speculative grade, while S&P Global Ratings cut the hard currency borrowing to “junk”.
Both cited likely changes in economic policy after respected finance minister Pravin Gordhan was fired, a move that rattled markets and sparked opposition protests against Zuma. [nL8N1HF20O]
Gigaba also said Treasury is committed to fiscal consolidation plans outlined in the 2017 budget by his predecessor Gordhan after S&P and Fitch downgraded the country.
Gigaba said the Treasury aims to stabilise the government’s net debt over the next three years at 50 percent of gross domestic production (GDP). It now stands at 45.5 percent and projected to reach 48.1 percent in 2019.
“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.”
With unemployment at a near record, the ANC is under increasing pressure to address gaping inequality that persists 23 years after the end of white-minority rule.
Black people make up 80 percent of the population, yet the lion’s share of the economy in terms of ownership of land and companies remains in the hands of white people, who make up about 8 percent of the population.
Gigaba reiterated that South Africa’s nuclear-expansion plan will be implemented “at a pace and scale that the country can afford” in brief remarks to reporters. “Any procurement of nuclear energy will follow due process,” he said.
Critics of the expansion plan estimated to cost 1 trillion rand ($73 billion), say Treasury can ill afford the project.