Former minister Malusi Gigaba. Picture: Gallo Images
Finance Minister Malusi Gigaba, while speaking at a press conference at Treasury in Pretoria on Thursday, admitted that the recently announced recession meant government would probably have to revise its economic target of 1.3% growth.
He said the trend of low growth over the past few years was impacting negatively on plans to reduce poverty, unemployement and inequality.
“South Africa’s GDP contracted 0.7% … following the 0.3% contraction of the third fourth quarter of 2016.”
He said all SA partners would need to reconsider how to bring about radical economic transformation.
He discussed the recent Moody’s credit downgrade, and admitted that all three major ratings agencies had identified low growth, political instability and poor management of parastatals as the reasons for their poor ratings and negative outlook on South Africa.
However, “We are committed to restoring the country to investment grade,” Gigaba said.
He said the issues raised by the agencies needed to be taken seriously, not only because the agencies were watching but because strong action needed to be taken for the good of society.
“I cancelled my trip to Germany to the G20 because I thought it appropriate to respond appropriately to the disappointing growth figures of quarter one.”
He said President Jacob Zuma had called for an urgent meeting of cabinet on Wednesday to discuss the economic crisis and he “is convening a full-day meeting in two weeks’ time of various economic ministers and clusters of key sectors to address obstacles to address the finalisation of policy processes and agree urgent timelines”.
The minister said they had also met with the business sector to discuss problems and were still consulting widely about how to “get the economy back on track”.
He said the country was at an “inflection point” where the choice was between being negative and pessimistic or remaining positive and optimistic.
Gigaba said Treasury’s analysis of the global and domestic economy had led them to “truly believe the glass if half full, not half empty”.
He conveyed a number of key messages to underline his optimism, including that “we have made real progress”, but it would take time for these to show fruit. He emphasised that government remained committed to the “fiscal framework” announced by his axed predecessor, Pravin Gordhan.
The executive would remain committed to maintaining the stability of Treasury as an institution, he said, and expressed his confidence in the newly appointed director-general.
Gigaba said government would heed the call for “policy stability to restore confidence”.
Most importantly, “inclusive growth and economic transformation are the top priorities of government and are mutually reinforcing. We must and will advance both of these.”
He added that there had been progress despite the economic contraction and that the economy could recover by the end of the year. He pointed to positive growth in private sector investment, improvements in the mining sector thanks to improved labour conditions and the recovery of the agriculture sector after a long period of drought.
He also said the country had moved from a situation of electricity shortage to surplus.
“The rebound, however, will not be immediate.”
He said policy uncertainty in mining needed to be dealt with and manufacturing incentives needed to be improved.
The problems at SAA would also be addressed, particularly the issue of vacancies on the board and the lack of a CEO.
He also said the issues at Eskom and other parastatals were receiving serious attention.
“We will be thrashing out details at the meeting the president has called in two weeks’ time.”
The meeting would result in a clear action plan with implementation timetables.