Cape Town - Despite the crisis in the mining sector, slower growth and a widening budget deficit, Finance Minister Pravin Gordhan has insisted South Africa’s finances are on “safe ground” and that there is no need for pessimism.
He lashed out at ratings agencies for “inappropriately” downgrading the country on its ability to service its debt – fast approaching 40 percent of GDP.
“As a country we face difficulties, but please, we are not in a terminal crisis. Let us prove the pessimists wrong,” he said.
Gordhan rammed the brakes on state spending and announced plans to ensure the government was more efficient. But he acknowledged the damage done to the economy by the Marikana shootings and the wildcat strikes the tragedy triggered, as well as government inefficiency and delivery failures.
“We have witnessed the crisis of labour relations in the mining sector, with tragic consequences in Marikana,” he said.
“We have seen mismanagement of supplies to schools and hospitals… Moody’s and Standard & Poor’s have seen fit to downgrade their ratings of our ability to service debt. Inappropriately, in our view.
“These events are a cause for urgent reflection. There are lessons to be learnt, mistakes to be acknowledged and corrective steps to be taken.”
Briefing journalists before delivering his medium-term budget policy statement, Gordhan said the country was not about to “fall off a fiscal cliff” and that it had survived worse.
“I think there are too many people outside this country who are making judgement calls… who don’t understand our history well enough, who don’t understand where we come from as a country and as a political culture, and who make negative pronouncements that are way out of line… with the realities of political developments in this country,” Gordhan said.
“There’s no catastrophe that’s going to hit our country.
There’s no need in my view for the pessimism that some are reflecting.
“We will have difficulties. We will have challenges… [but] we have survived worse than this to get to where we are today.”
Gordhan also referred to the uncertainty over policy as the ANC prepared for its national conference – at which debates over nationalisation are likely to rage.
He said it was a “matter of fact that we have, on some issues, a difference in philosophical approach, emphasis and a belief there might be different ways of solving a particular problem”.
The cabinet’s decision not to increase funding beyond the ceiling set in the Budget was a “firm commitment” to fiscal sustainability – necessary to keep under control the country’s debt, which he expected to peak at 39 percent of GDP in 2015/16, Gordhan said.
Gordhan pledged “strong measures” to ensure value for money in public spending, better controls over the public sector wage bill, and a drive for more productivity.
In real terms, spending would grow by 2.9 percent over the next three years.
Gordhan said “rigorous” procurement reforms were planned “to strengthen service delivery, eliminate waste and root out corruption”.
Revising the growth forecast downward to 2.5 percent from 2.7 percent, Gordhan warned that the global economy was slowing down and that recovery after deep recessions could take several years.
About R40 billion in savings over the next three years had been made possible by stripping budgets of fat and reprioritising spending.
This would pay for the new spending Gordhan announced.
This includes the R461 million bill to host the 2013 Africa Cup of Nations, for which South Africa had not budgeted but which it agreed to do after Libya’s meltdown; a R450m upgrade to Mthatha’s airport; and paying R118m in penalties incurred by Denel when South Africa cancelled its order for Airbus A400M aircraft.
Other spending adjustments include a R188m VAT bill for the new SA Agulhas Antarctic research vessel, R80m for additional game rangers to fight rhino poaching in the Kruger National Park, and R63m to deploy vessels and other resources in joint anti-piracy operations in the Mozambique Channel.
Revised provincial allocations include R366m to build or revamp hospitals and R4bn to meet higher-than-expected public sector wage increases.
“There’s no doubt… that we in government have to up our game with regard to implementing policies, making more efficient use of resources and ensuring that where large sums of money are assigned, we get much better quality of outcomes,” he said.
Political Bureau