Cape Town - It’s time to show the world that leaders from all spheres in the country have a common purpose in igniting growth, Finance Minister Pravin Gordhan said from Washington yesterday as he braced himself for a series of meetings with ratings agencies.
Investors were satisfied with the country’s ability and willingness to repay its debts, Gordhan said, and the focus of the discussion was now solely on growth.
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“Growth is the big concern ratings agencies have among us and if we can show that leaders across the board identify our problems in a similar way and are committed to the solutions, we can make interesting progress,” he said.
He was in Washington for the spring gathering of the International Monetary Fund, World Bank and G20, and said the question of structural reform loomed large in the talks as the realisation took hold that monetary and fiscal policy were approaching the limits of their effectiveness in lifting the global economy out of its post-recession sluggishness.
Among the reforms relevant to South Africa was that of state-owned enterprises (SOE) – a feature of both President Jacob Zuma’s State of the Nation address and the Budget.
But a public spat between Gordhan and state arms maker Denel last week would have done little to persuade overseas observers that the unity of purpose the minister spoke of has materialised.
The Denel row burst into the open after Gordhan issued a statement warning it would be in breach of the Public Finance Management Act if it pursued a controversial joint venture with a company linked to the Gupta family.
Gordhan made it clear he and Public Enterprises Minister Lynne Brown had not given the nod for the deal to go ahead, after Denel announced the previous week it had been lawfully concluded.
Denel is required by the act to get the permission of the two ministers before forming a company.
But, in an unprecedented show of defiance, Denel hit back at Gordhan, implicitly accusing him of going public in bad faith and against the spirit of co-operative governance contained in the constitution.
Ratings agencies consider the financial health of state-owned enterprises to be among the major risks to Gordhan’s fiscal consolidation plans because they have racked up a total of R467 billion in loan guarantees from the state, although they have drawn against only R258bn of this amount.
Gordhan told Independent Media he would consult Brown on his return this week in dealing with Denel.
Deputy President Cyril Ramaphosa, who chairs an interministerial committee on SOE reform, would be giving an update on progress soon, Gordhan said.
There would also be an announcement on the fruits of joint efforts between the government and business to identify measures to lift growth.
“We’ve met some of those constituencies in the last 10 days and there’s good progress.
“As soon as we get an opportunity to report back to the president we’ll make those public announcements, hopefully within the next month,” Gordhan said.
Turning around the growth picture would play a significant part in changing the prospects for the country’s sovereign credit rating.
“The focus is on how we grow the economy so it’s easier to collect more revenue. It is possible to change the GDP denominator in many of the ratios that are looked at, so we can look better, both in terms of our numbers but also in terms of our performance as an economy,” he said.
The message to the ratings agencies would be about the work being done to close the gaps between the government, labour and business and get “a common sense of the urgent situation that confronts us, demonstrate we’re capable of working together on concrete steps on each of those structural reform areas and, in particular, improve confidence, both among established business and black business, which would enable more investments in the economy”.
He said the joint investor road show he did with business and labour after the Budget had paid dividends in the form of the successful foreign bond issue earlier this month.
He will be meeting representatives of Moody’s and S&P later in the day “and those meetings are not about negotiating anything, it’s largely about responding to the information needs they have, that might help them”.
Decisions on possible ratings moves were expected at the beginning of June, with S&P due to visit the country on May 16.
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