South Africa’s new finance minister pledged on Thursday to do what he can to keep the country from a third credit downgrade to junk status, saying he would meet ratings firm Moody’s to persuade it he will stay on the path of fiscal discipline.
Malusi Gigaba, who replaced the respected Pravin Gordhan in a cabinet reshuffle that triggered credit downgrades to sub-investment by S&P Global Ratings and Fitch, told local investors he would clarify the Treasury’s policy positions to Moody’s during an upcoming roadshow overseas.
“We will do all we can to avoid another downgrade and one of the ways to do that is to engage with Moody’s directly, to demonstrate our willingness to stay the course in terms of fiscal discipline and fiscal consolidation,” Gigaba told reporters after meeting investors in parliament.
But he added: “There is no silver bullet in this regard. Nothing is taken for granted and nothing is taken as a guarantee.”
Gigaba later told the national broadcaster he would tell investors attending an International Monetary Fund meeting in the United States next week that the economy was showing signs of recovery and the government would not spend money it did not have “whatever the social pressures may be”.
The cabinet reshuffle by President Jacob Zuma, who is mid-way through his second five-year term ending in 2019, has roiled domestic financial markets and battered the rand.
The opposition has called on Zuma to resign and held protests to force him out of office.
Gigaba, formerly minister of home affairs, said he had briefed Zuma on the implications of the downgrades which could hit the poor hard, as higher debt costs could lead to less money for services such as sanitation and housing.
Inflation was also likely to rise and consumer spending decrease as essentials such as transport and food cost more, analysts said.
Gigaba said state firms such as power utility Eskom, national airline SAA, have relied on costly government bailouts.
“In our engagement with the president, we indicated that commitment to stick to the budget as presented in the national assembly in February and to ensure that we pay attention to the governance of state-owned companies,” said Gigaba.
“It is a difficult space for everybody given the fiscal constraints, the slow growth in the economy, even though our economy is expected to grow more than it has done last, but its still very slow growth not creating sufficient volumes of jobs required.”
Gigaba said a new director general for the Treasury would be appointed in May, to replace Lungisa Fuzile who resigned after the cabinet reshuffle.
(Editing by James Macharia/Jeremy Gaunt)