Johannesburg - Finance Minister Pravin Gordhan said yesterday that South Africa was working to restore investor confidence and progress was being made in the discussions between the government and the private sector on how to do things differently in order to spur investment and deal with the country’s key challenges, including high unemployment.
Gordhan, whose return to the Treasury followed a damaging episode involving the sudden firing of Nhlanhla Nene in December as finance minister, said over the past few weeks the government had worked hard to understand “our current environment and challenges and are beginning to ask ourselves some tough questions about what we need to do differently”.
He was speaking in Davos, Switzerland, where he is co-leading a delegation of government ministers and business executives representing South Africa at the World Economic Forum’s (WEF) annual meeting.
Gordhan noted that South Africa was not immune to the stresses that other emerging markets were experiencing on the back of falling demand for commodities and a volatile global environment.
Even so he said he was confident that South Africa remained a viable investment destination due to a number of high-profile recent investment commitments by such companies as BMW (R6 billion), Unilever, Johnson & Johnson, Hisense, Mercedes (R2.4bn), General Motors (R1bn), Ford (R3.6bn), VW (R4.5bn) and Beijing Automobile International Corporation (R11bn).
“So a lot of the focus of our work is about how we create greater confidence both amongst foreign investors in our debt market, but also in the real economy, but in particular amongst South African business. So, therefore, leading up to Davos we’ve had good discussions with our business sector to prepare for this eventuality,” he told a WEF briefing.
He said he was confident that even with a gloomy forecast for gross domestic product (GDP) by the International Monetary Fund (IMF) this week, economic growth for this year could still prove better than most estimates. The IMF cut its GDP forecast for 2016 to 0.7 percent from an October estimate of 1.3 percent.
“IMF numbers (from Tuesday) seemed to indicate that we might be looking fairly dismal. The challenge we face is to see what we can do differently to surprise the IMF and others a little bit this year,” Gordhan said, adding that he would provide more detail about his own outlook when he presented the country’s annual Budget on February 24.
Upbeat Budget
“Our numbers we publish when we table the Budget might indicate more optimistic numbers than what the IMF is saying at the moment,” said Gordhan. He said the government was committed to continuing with fiscal prudence and consolidation.
Gordhan acknowledged that the “struggling areas” of the economy were agriculture, mining and manufacturing, and efforts would be made to mitigate the impact of this on the broader economy by embarking on a process of reforms to create efficiencies, build skills, and invest in infrastructure.
He also told the briefing that the country had now “stabilised our energy situation” and there were also positive spin-offs emerging from the renewable energy space. The rand was also helping to underpin an improvement in exports.
Gordhan said the government also intended to give a lot of attention to the development of small businesses, a process that would involve “de-concentrating” the economy or broadening participation of various players in sectors currently dominated by a few large companies.
“Our contribution to small business too fragmented,” he said, adding that the private sector was vital in helping to build an entrepreneurship culture. “Now that we have a small business development ministry, hopefully we can concentrate those resources.”
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