Malusi Gigaba, the new finance minister, has said he will use the National Treasury to push for inclusive economic growth, while sticking within spending frameworks already in place.Photo: Bloomberg Malusi Gigaba, the new finance minister, has said he will use the National Treasury to push for inclusive economic growth, while sticking within spending frameworks already in place.Photo: Bloomberg
Johannesburg – On the back of SA being cut to junk by
S&P – the first rating agency to do so – the National Treasury says it is committed
to fiscal consolidation.
On Monday evening, S&P downgraded South Africa’s
credit rating to junk, less than a week after a Cabinet shuffle.
The rating, which comes after President Jacob Zuma
unceremoniously axed Finance Minister Pravin Gordhan and his deputy late last
Thursday – sending the rand down at least 5 percent – is almost three months
ahead of its scheduled ratings action.
In a statement, the global credit agency, says “the
executive changes initiated by President Zuma have put at risk fiscal and
growth outcomes”.
Zuma instituted a wide-ranging Cabinet reshuffle last
week, which saw nine ministers lose their posts.
In a statement, National Treasury says government has
noted the announcement, but it points out that, although S&P lowered its
rating of foreign currency-denominated debt to a sub-investment grade, rand-denominated
debt – which constitutes 90 percent of the debt portfolio – retains its
investment-grade rating.
“While the leadership of the finance portfolio has changed,
government’s overall policy orientation remains the same.”
Read also: 'Executive changes' risk growth – S&P
National Treasury reiterates newly-appointed Minister
Malusi Gigaba’s April 1 statement in which he said: “Government has been, and
will remain, committed to a measured fiscal consolidation that stabilises the
rise in public debt”.
National Treasury adds South Africa is committed to a
predictable and consistent policy framework, which responds to changing
circumstances in a measured and transparent fashion.
“Open debate in a democratic society should not be a
cause for concern, but reflects an important means to accommodate differing
views. South Africa’s constitutional arrangements remain robust.”
It also points out these key institutional strengths are
acknowledged by rating agencies.
“This rating announcement calls for South Africans to
reflect on the need to sustain and act with urgency to accelerate inclusive
growth and development so that we can reverse the triple challenge of poverty,
unemployment and inequality.
“Reducing reliance on foreign savings to fund investment
and relying less on debt to finance public expenditure will secure South
Africa’s fiscal sovereignty and economic independence.”
S&P had SA a notch above junk status – non-investment
grade – and was due to reassess the country in June. Moody’s, which rates SA
two notches above junk, will access SA this month. Fitch also rates SA a notch
above junk, but has not yet indicated when it will reassess the country’s
rating.
the full statement here
A lowering to junk status means that it will be harder
and more expensive for SA to borrow money to invest in vital areas at a time
when the budget deficit and debt to gross domestic product ratio must be
carefully limited.
S&P says SA’s long-term foreign currency sovereign
credit rating was dropped to 'BB+' from 'BBB-', while the long-term local currency
rating was bumped down to 'BBB-' from 'BBB'.
The rating agency adds it also lowered the short-term
foreign currency rating to 'B' from 'A-3' and the short-term local currency
rating to 'A-3' from 'A-2'. The outlook on all the long-term ratings is negative.
National Treasury adds government remains committed to
making sure that its work with business, labour and the civil society continues
to improve the business confidence and implement structural reforms to accelerate
inclusive economic growth.
Gigaba will address the media on Tuesday to discuss the
rating.
ONLINE