National Treasury media statement
The Minister of Finance Mr Pravin Gordhan undertook a roadshow to London, Boston and New York last week accompanied by leaders from business, three labour federations and senior officials from the National Treasury and South African Reserve Bank. The purpose of the roadshow was to engage with international investors after the tabling of 2016 Budget and also provide updates on the latest economic developments in the country and plans for the medium term.
The delegation met with investors who collectively manage several trillions of dollar assets, split between those who are invested in local companies and those who buy the debt issued by government. There are some of the investors we owe in excess of R600 billion (gross debt is currently around R2 trillion).
Meetings were held with over 250 investors, some with significant exposure to South Africa. Among the issues raised by investors are:
- Risks to the fiscal risks and strain in balance sheets of state-owned-copanies
- Recent developments on sovereign credit ratings
- Slow economic growth
- Issues relating to business and investment confidence
- Regulatory clarity, labour and monetary policy and
- The political environment
The issue raised by investors on the roadshow underscore the need for South Africa to implement the growth-inducing economic reforms with urgency. The world economic outlook is uncertain and it is crucial that the country be seen to be united and focused on tackling its socio-economic challenges. South Africa is expected to take ownership and speedily deal with domestic constraints to economic performance.
The next few months are critical as South Africa is expected to demonstrate concrete actions to map a path for higher economic growth as it seeks to preserve its investment grade rating and also demonstrate progress to address poverty, unemployment and inequality.
Our main message to the investors was that as a resilient nation, South Africa has the potential to overcome its immediate challenges. What is required is for government, labour and business to work together on concrete steps and actions that will be taken to lift economic growth.
South African finmin says hopes to avoid downgrade after meeting ratings agencies
JOHANNESBURG, March 14 (Reuters) – South African Finance Minister Pravin Gordhan said on Monday he had constructive discussions with ratings agencies on a roadshow in London and the United States last week as Pretoria tries to fend off downgrades amid weak economic growth.
The trip came against the backdrop of mounting concerns that Africa’s most industrialised economy could lose its investment-grade rating by mid-year, potentially raising borrowing costs for government and firms alike.
Some of the main concerns raised during meetings with over 250 investors, included risks to the fiscal outlook, slow economic growth, clarity over labour and monetary policy as well the political environment, Gordhan told a news conference.
South Africa was still able to pay back its debt and could avoid a downgrade “if we work together”,Gordhan said.
“Once you get downgraded on average it takes you five years or more to work your way up again, so you don’t want to end up there as a country,” he said.
Moody’s visits South Africa this week to assess the economy and decide whether to alter its Baa2 rating. Moody’s has said it was concerned about the ability of government policies to restore fiscal strength and boost growth.
Investors have been worried about undue political interference in fiscal policy in Africa’s most industrialised but ailing economy after President Jacob Zuma changed finance ministers twice in less than a week in December.
