Investors demand South African Government budget implementation be less rhetoric
Wednesday’s budget notwithstanding, South Africa may still be on the path to a credit ratings downgrade. When the Finance Minister Pravin Gordhan delivered the national budget, he introduced new taxes, tightened spending on the public purse and made more commitments to implement the National Development Plan, including plans to phase out non performing state owned enterprises.
Most were pleased with the South African budget.
“This was a well-considered budget which was trying to raise revenue.He has come in as a hawkish finance minister who had the guts to hike taxes in a municipal election year.” Said Lesiba Mothata, Chief Economist, Investment Solutions
“He’s placed the National Development Plan at the centre of it. There’s been uncertainty about this for far too long. Now this is a very good development. Secondly, he has introduced structural discipline” Said Mosiuoa Lekota, Leader of COPE (Congress of the People)
News of a shake up at cash strapped SAA was also welcomed. State owned entities have been weighing heavily on the national fiscus.
“We are happy about the merger of SAA and the Express. We are not happy about the invitation for private investment in that field because that will open a way towards gradual privatisation of the SAA.” Said Julius Malema, Economic Freedom Fighters
“We’ve learnt from our many visits to China that Chinese have used that correctly of saying, here is a state’ owned enterprise, we recapitalise it, we invite the private sector to invest in it but we keep the controlling stake and it gets recapitalise and it improves efficiency and I think that’s the direction we are taking.”said Gwede Mantashe, Secretary-General, ANC
Big business too, gave the budget a thumbs up. The government’s olive branch seems to have been accepted. It was clear in the budget that the private sector is on board to help revive the economy.
“I think everyone would be the first to admit that this is the first step in a longer term process but I think we’ve got some really important building blocks in place to improve confidence.” Mike Brown, CEO, Nedbank
But will it all be enough to prevent a ratings downgrade to junk?
“As it is, no. What we have to see literally in the next few weeks – how quickly the cabinet moves within the framework of the budget speech to come up with tangible projects in ports, in SAA, in electricity and so on an so forth. To bring in the private sector quickly in line with what the minister promised. If those actions are not taken, statements of intention alone will not do the job.”Iraj Abedian,CEO, Pan African Advisory Services
“Credit downgrade is a function of whether we are doing the right thing or not. It’s not something that you can stand in the morning and say, here we are, we’re stopping a downgrade because it is an objective reality because it’s out of your control.”Gwede Mantashe, Secretary-General, ANC
Finance Minister Pravin Gordhan managed to calm South Africans assuring the public that work is underway to fix this ailing economy. However investors and the ratings agencies wanted less rhetoric and more detail, which again fell short in this budget. The Rand lost 2% after the budget speech, an indication that not all were happy.
