Gigaba: Treasury committed to fiscal consolidation after downgrades

Finance Minister Malusi Gigaba said the Treasury aims to stabilise the government’s net debt over the next three years at 50% of gross domestic production (GDP).

Finance Minister Malusi Gigaba. Picture: Christa Eybers/EWN

JOHANNESBURG – South Africa’s new Finance Minister Malusi Gigaba said on Wednesday Treasury is committed to fiscal consolidation plans outlined in the 2017 budget after S&P and Fitch downgraded the country to sub-investment grade.

Speaking to local investors at the Development Bank of South Africa, Gigaba said the Treasury aims to stabilise the government’s net debt over the next three years at 50% of gross domestic production (GDP).

“To accomplish this we are tightly controlling expenditure,” Gigaba said.

“Fiscal sustainability is a prerequisite for inclusive development ... we are therefore committed to the fiscal consolidation plans as outlined in the February budget.”

Last week, Fitch downgraded South Africa’s foreign and local currency debt to speculative grade, while S&P Global Ratings cut the hard currency borrowing to junk status. Both cited likely changes in economic policy after a Cabinet reshuffle.

Gigaba reiterated that South Africa’s controversial nuclear-build programme will be implemented “at a pace and scale that the country can afford” in brief remarks to reporters.

“Any procurement of nuclear energy will follow due process,” Gigaba said.

Critics of the expansion plan have raised questions about environmental risks and costs, estimated at R1 trillion, saying the country can ill afford the project.

State utility Eskom said on Sunday if all processes go well, it will issue a request for proposals around June.

South Africa, which has Africa’s only nuclear power station, wants atomic power to play the leading role in expanded power generation, easing the country’s reliance on an aging fleet of coal-fired plants. It has asked Eskom to procure an additional 9,600 megawatts (MW) of capacity.