Nene: Budget under pressure

Johannesburg - South Africa's fiscal position has come under increasing pressure from a weakening economic outlook, and the prospect of further tapering in US monetary stimulus has added to the uncertainty, Finance Minister Nhlanhla Nene said on Tuesday.

Nene told economists at a Thomson Reuters event that he expected increased spending, which would put a strain on the budget, but this would be focused on investment rather than consumption.

Finance Minister, Nhlanhla Nene. Photo: Sam Clark. Credit: Independent Newspapers

“The future suddenly looks very different for South Africa, in a world with higher interest rates, falling commodity prices, and changing trade patterns,” Nene said.

“The tapering of quantitative easing is likely to continue to unsettle emerging markets. With the unresolved debt problems in Europe, the bond market is skittish, with the possibility of spiking interest rates or abrupt changes in demand for our debt.”

He acknowledged that ongoing strikes, including a five month platinum boycott that saw GDP contract in the first quarter, were putting pressure on the economy, but said there was a new push in the government to try and ease labour relations.

“Even during the platinum strike government made an attempt of entering the fray, and I would want to believe that progress was actually made,” he said. - Reuters