Johannesburg - South Africa may need
outside financial assistance to get out of its economic spiral,
Finance Minister Malusi Gigaba said on Friday, calling for
"drastic measures" to revive growth.
At the same time, embattled President Jacob Zuma admitted
that the economy may not hit the forecast 1.3 percent growth
target set by government, and urged political allies to
discuss policies, including land redistribution, to revamp the
economy.
He called for "radical solutions" - albeit within the
constitution - to redistribute land to the country's black
majority.
Both men were speaking at a conference of the ruling African
National Congress (ANC).
South Africa is in recession and has an unemployment rate of
close to 28 percent. It is also immersed in political rows over
Zuma's abilities and over how independent the central bank
should be.
Gigaba, who was appointed as finance minister in March after
Zuma sacked internationally respected Pravin Gordhan, said South
Africa may need to get outside financial help.
"Should the main indicators continue to disappoint any
further we may have to seek assistance from quarters we have
thus far avoided," Gigaba added, without elaborating.
President Zuma gestures during his opening address at the ANC's 5th National Policy Conference at the Nasrec Expo Centre in Soweto. Picture: Siphiwe Sibeko/Reuters
Asked by Reuters if he was referring to the International
Monetary Fund, Gigaba smiled and said "Any".
The rand extended its losses against the dollar as
much as 0.7 percent lower, while bonds weakened after Gigaba's
comments on the possibility of seeking outside assistance.
Isaac Mashego, senior economist at Nedbank, said with slow
economic growth, the government is going to have to borrow more.
"This might mean going to multilateral institutions like the
IMF. This is the worst case scenario," he said.
The fund's senior resident representative in South Africa
Montfort Mlachila was not immediately available to comment.
A senior ANC member said Gigaba might have been talking
about the IMF but it could also be China or other sources.
With their economies floundering and currencies sinking,
African states from Nigeria to Zambia have been seeking IMF
assistance to fund infrastructure and plug budget deficits.
African nations broadly see China as a healthy
counterbalance to Western donors, and Beijing has ploughed
billions of dollars into agriculture, roads, ports and railways
projects.
Credit downgrades by two of the top three ratings agencies,
based on the economic and political turmoil, have dented
business and consumer confidence in South Africa, which has just
suffered two quarters of contraction.
Touching on the political row over the central bank, Gigaba
accused the country's anti-corruption agency of overstepping the
mark in suggesting changes to the way the central bank works.
A call by South Africa's public protector for an overhaul of
Reserve Bank's mandate -- to focus on growth rather than
inflation and the currency -- rattled investors this month,
hitting the rand. The Reserve Bank has filed a court challenge
to quash the recommendation.
"The public protector does not have the power to direct
parliament to amend the constitution," Gigaba told business
leaders at the start of a six-day policy conference.
"These recommendations should have been directed at the
finance ministry. We should all insist on the independence of
the South African Reserve Bank."
Land ownership
The row also exposed worsening divisions between state
institutions just as Zuma is embroiled in a net of scandals.
Zuma has drawn unprecedented criticism from senior ruling
party members in recent weeks. A shock cabinet reshuffle
prompted in March ratings agencies to downgrade South Africa to
"junk" status and unemployment is at a 14-year high.
The parliament said Zuma would face a no-confidence vote
brought by the opposition on August 3.
Zuma's critics see the public protector's comments as an
attempt to undermine the bank’s authority as part of a broader
attack on state institutions, including the finance ministry,
the tax authorities and the public protector’s office.
The president rejects such criticism.
Zuma will be replaced as ANC leader at a national conference
in December. Deputy President Cyril Ramaphosa and former African
Union chair Nkosazana Dlamini-Zuma, the incumbent's ex-wife,
widely viewed as frontrunners. The conference should offer clues
to who may be in the ascendant.
Gareth Newham, a governance specialist at Pretoria-based
think tank Institute for Security Studies said although the
conference will focus on policy, the leadership battle to
succeed Zuma would be at the heart of the discussions.
"The way policy is spoken about and framed is going to be a
proxy for leadership battle," he said.