South Africa's FinMin says economic recovery is underway

PUBLISHED: Tue, 13 Dec 2016 07:59:11 GMT

Improved electricity supply, an easing drought and a depreciation of the rand currency are underpinning a recovery in the South African economy, Finance Minister Pravin Gordhan said on Monday.

Gordhan’s comments echo the view of analysts who in a Reuters poll published last week forecast that rising commodity prices would also provide a fillip to South African growth, though they cautioned it was still short of the investor confidence needed to expand faster.

“We believe we are in the process of recovering as an economy,” he said on Monday at a conference of the National Union of Metal Workers of South Africa (Numsa) in Cape Town.

The finance minister pressed the need for macroeconomic stability to cushion the economy from potentially volatile capital flows amid an uncertain global environment.

In his October mid term budget statement to parliament, Gordhan slashed the 2016 economic expansion forecast to 0.5 percent from the 0.9 percent predicted earlier by the Treasury, but said GDP growth would recover to 1.3 percent next year.

In a sign of the challenges ahead, however, data last week that Africa’s second biggest economy expanded an anemic 0.2 percent in the third quarter as manufacturing contracted sharply.

At a separate event, Treasury director-general Lungisa Fuzile said Africa’s most industrialised country needed to “fix its politics” in order to boost growth.

South Africa held on to its investment grade credit ratings with Moody’s, S&P and Fitch, but all three warned that political turmoil could hurt growth.

“The world is seeing what’s happening within our borders,” Fuzile told a business forum.

President Jacob Zuma has faced several corruption scandals, more recently when the nation’s anti-graft watchdog this month asked for a judge to investigate alleged influence-peddling by a wealthy family Zuma has called his friends. Zuma denies any wrongdoing.

The state prosecutor dropped fraud charges in late October against Gordhan, executing a U-turn in a case that rocked financial markets and drew accusations of political meddling. But he is still under investigation for his role in setting up a unit at the tax department which police say illegally spied on politicians.

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