South Africa had been given “breathing space” until June to implement “concrete” actions that demonstrated its ability to both manage its fiscal constraints and improve its growth prospects, Finance Minister Pravin Gordhan said on Monday, following his return from an investor roadshow to the UK and the US.
Joined during a media briefing at the JSE in Sandton by some of the business and labour representatives that had formed part of the South African roadshow delegation, Gordhan again emphasised that it was possible for the country to avoid being downgraded to a sub-investment credit rating, or junk. However, both ratings agencies and investors were increasingly insistent that South Africa began showing proof of implementation to address the risks facing its economy.
“We need to provide very concrete evidence over the next few months that we are not just talking, that we are not just delivering new plans and new proposals. It’s time for collective action, concrete action and demonstrable action, which the world can say: ‘yes, we believe you guys’.”
The delegation met with more than 250 investors and asset managers – who collectively represent some R600-billion of South Africa’s R2-trillion debt stock – during meetings in London, Boston and New York.
Flanked by Jabu Mabuza and Cas Coovadia, from business, Joseph Maqhekeni, representing labour, and deputy South African Reserve bank governor Daniel Mminele, Gordhan acknowledged that investors were particularly concerned about South Africa’s flagging growth performance and wanted clarity on how the country planned to rekindle an economic expansion.
However, the credibility earned by the National Treasury over decades meant that both ratings agencies and investors had shown a preparedness to provide South Africa with some time to demonstrate that it was able to put growth “on the agenda again”, while also managing its fiscal risks and dealing with legislative, regulatory and policy uncertainties.
Besides the perennial issue of labour-market instability, the lack of certainty over amendments to the Mineral and Petroleum Resources Development Act was raised as a particular area of concern, as was the poor performance of a number of State-owned companies and the burden this could impose on the fiscus.
Many questions had also been raised about whether the political climate was truly supportive of the interventions being pursued under the stewardship of Gordhan, who was hastily reappointed Finance Minister in December after markets and society reacted with extreme negativity to the so-called ‘9/12’ meltdown – an event precipitated by President Jacob Zuma’s removal of then Finance Minister Nhlanhla Nene and his appointment of the little-known David ‘Des’ van Rooyen, who had since replaced Gordhan as Cooperative Governance and Traditional Affairs Minister.
Gordhan, who had since faced “intimidating and distracting” questioning from the Hawks regarding their probe of a South African Revenue Service investigative unit, said there was little question that “the investor world is watching South Africa very carefully”.
He refused to be drawn directly, though, on an alleged offer by the Gupta family, which is said to have close ties to Zuma, for Deputy Finance Minister Mcebisi Jonas to replace Nene, saying only: “My silence says it all.”
Gordhan indicated that his focus, in partnership with organised business and labour, was on taking “more and more strides in the right direction to ensure that all of the resources we command individually are brought to bear in the national interest.”
Government and business were already working jointly on a series of actions to support both vulnerable sectors such as mining, agriculture and construction, as well as to bolster small businesses and sectors seen as performing below potential, such as tourism and export-oriented manufacturing. The intention was to incorporate labour into these initiatives, most of which would deliver action plans to the President within the coming three months.
“Work has started and is ongoing,” Coovadia reported, adding that many of the projects would be ready for implementation by May.
Work was also advancing to ensure secret balloting ahead of strikes, with National Council of Trade Unions president Maqhekeni indicating that most unions had already incorporated such clauses into their constitutions. There was also a process under way, through the National Economic Development and Labour Council, to ensure that legal strikes were both peaceful and shorter in duration, possibly by using arbitration awards.
Gordhan said that, working together, there was a real possibility to “pull our socks up . . . unite all the good people in this country, who want to contribute to growth and employment and development and overcome the historic problems we have”.
However, he warned that should South Africa lose its investment-grade rating it would need to begin working immediately to restore it.
“But it is not so simple . . . once you get downgraded, on average it takes five years or more to work your way up again. We don't want to end up there . . . and that's why we make this earnest appeal at all times: don't worry about all this other news that is circulating in the air, focus on what's good for the country, what's good for the economy . . . so that future generations will actually say that this generation did try its best and left behind a much better and more stable economy than it inherited."