‘There needs to be a collective effort to improve the economy’
Pravin Gordhan says government is working to turn the economy around but this must be a collective effort.
JOHANNESBURG - Finance Minister Pravin Gordhan has paid tribute to the business sector for joining with government to prevent a rating downgrade.
Standard & Poor's Global has decided to keep its outlook for South Africa unchanged at BBB-minus with a negative outlook, avoiding junk status.
Gordhan said government is now working to turn the economy around but this must be a collective effort.
S&P Global said there have been concerns about political instability but Gordhan said this is normal as the country is approaching an election period.
"We're going towards elections, so I think we must explain to the world, collectively, that in any democracy in the world you're going to get noisy period."
But he says all in government need to realise that there needs to be a collective effort to improve the economy.
"We require all of us to see not only our immediate interests as being important, but national interests as equally important."
In response to the ratings decision, government says in a statement that the rating outcome demonstrates that South Africans can unite, especially during difficult times, to achieve a common mission.
PLAN TO SAVE THE ECONOMY
Gordhan said there's a plan to make sure the economy improves significantly in the next six months, to avoid a later downgrade in December.
The government said it realises that there needs to be economic reform.
S&P Global has cited government spending as key to improving economic growth.
In response, Gordhan said special attention is being given by Cabinet to curb expenditure
"There's absolute consensus in Cabinet that we have to work within the financial consensus that we have."
S&P Global said it's also revised down real growth expectations to 0.6 percent for this year, from 1.6 percent forecast last December.
But Gordhan said there is a plan to address this.
"We're indeed a resilient nation and we've many things going for us and if we build on them, in constrictive and united way, we can start getting positive results."
Gordhan said while there's a lot to be done to grow the economy, the country is moving in the right direction.
"All of us benefit from increased growth, increased confidence, increased investments and institutions both in the private sector and in the public sector working well towards a common welfare of all South Africans."
S&P Associate Director Gardner Rusike also highlighted the threat that political turmoil poses for the economy, but has praised Eskom for its improvements in delivering electricity.
"We believe that there are steps that are being taken by the government, so it is an issue of saying whether the steps will be taken in full; in terms of implementation and also whether they help to achieve the desired outcome, which is to improve the rating."
The agency has pointed out South Africa's low economic growth rate and labour unrest as areas of concern.
IT'S NOT ALL GOOD NEWS
Meanwhile, S&P Global has cited the consequences of low GDP growth, as a major concern.
It said poor growth could eventually weaken government's social contract with business and labour.
It also said lower oil prices, a weaker exchange rate and higher electricity prices have increased inflationary pressures.
But it said energy sector improvements will likely reduce some of the economic bottlenecks.
In response, the Treasury said it has been warned that the rating could be downgraded later this year if policy measures do not turn the economy around.