South Africa's Zuma and finmin meet to discuss state-owned firms before Fitch review - CNBC Africa

South Africa's Zuma and finmin meet to discuss state-owned firms before Fitch review

Financial

by Reuters 0

President Jacob Zuma and Finance Minister Pravin Gordhan met on Tuesday to discuss measures to turn around the economy. PHOTO: Flickr

South Africa's President Jacob Zuma and Finance Minister Pravin Gordhan met on Tuesday to discuss measures to turn around the economy and struggling state owned firms a day before a ratings review by Fitch.

State-owned companies, which Treasury has said have 467 billion rand ($31 billion) in state guarantees, have been singled out by ratings agencies as a major risk to the credit rating of Africa's most industrialised economy.

South Africa has dodged downgrades from S&P Global Ratings and Moody's, taking some pressure off Zuma ahead of elections in August and giving policymakers more time to implement reforms to boost GDP growth.

Spokesman for the presidency, Bongani Ngqulunga, said the government will act decisively to rehabilitate loss-making state firms as it did with power utility Eskom.

The power supplier was struggling to keep the lights burning early last year and was forced to implement controlled power cuts that hurt economic activities but has now said it has turned the corner, going without power cuts for about a year.

"I think you will see the same thing also with other state-owned enterprises, so that is what the minister and the president discussed today," Ngqulunga said, adding that the meeting lasted four hours.

An analyst said reviving struggling state firms will pose a challenge for Gordhan in his bid to revive their performance.

"This kind of lengthy meeting is probably reflective of the clashes within government on how to deal with state-owned enterprises," said Daniel Silke, a director at Political Futures Consultancy.

Fitch is likely to affirm South Africa's investment grade rating but may lower its outlook to negative, analysts said.

 

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