South Africa needs to provide policy clarity to boost investor confidence, after a cabinet reshuffle and a pledge to introduce “radical economic transformation”, Finance Minister Malusi Gigaba said on Tuesday.
Gigaba’s comments echo those of President Jacob Zuma about redistributing wealth, which remains largely in the hands of the white minority more than two decades after apartheid ended, raising uncertainty about South Africa’s policy direction.
“We know that we need to continue acting conscientiously to do what we have to do, including providing policy clarity on a number of areas … to boost business and investor confidence,” Gigaba told parliament’s finance committee.
Both S&P Global Ratings and Fitch downgraded South Africa’s credit rating to below investment grade last month, citing likely changes in economic policy after Finance Minister Pravin Gordhan was fired, shaking investor confidence.
Lower ratings typically make it more expensive to borrow, particularly when they fall below investment grade, and risk deterring the foreign investors on whom South Africa relies to finance its big budget and balance of payments deficits.
“The debates around radical economic transformation are ongoing,” Gigaba told the finance committee. “How do you get the majority of South Africans … to participate in the economy, to own some assets, to become self-sustaining?”
He said the ruling African National Congress, which steers government policy, had not yet defined what the transformation entailed.
(Reporting by Wendell Roelf; Editing by James Macharia, Larry King)