Treasury to outline ‘decisive’ policy following S&P downgrade

The ministry says it has plans to address root causes of revenue shortage of about R50 billion.

Security guards at National Treasury. Picture: EWN

JOHANNESBURG - Treasury has responded to Standard and Poor’s Global currency downgrade, saying it will use its annual budget next year to outline “decisive” policy to strengthen its fiscal framework.

The ministry says it has plans to address root causes of revenue shortage of about R50 billion.

The ratings agency announced the downgrade, citing a further decline in the country's economic outlook and public finances.

Spokesperson Mayihlome Tshwete says Treasury has noted that a contributing factor to the matter is the country’s lack of economic growth.

The ministry says it aims to restore business and consumer confidence while catalysing inclusive growth.

“To this end, government is working urgently and diligently on practical steps to provide the necessary policy certainty, environment conducive to investment, and predictability that the country so desperately needs. Decisive actions in managing government expenditure and closing the revenue gap are critical for achieving sound public finances.”

It says government will continue to engage with all stakeholders, and the general public on all key developments as progress continues towards the finalisation of the 2018 budget.

The downgrade by S&P comes after Finance Minister Malusi Gigaba shocked markets on 25 October by flagging sharply weaker growth expectations, a wider budget deficit and rising government debt.

The government has since appointed a judicial commission of inquiry into the causes of a R50 billion revenue shortfall and to investigate a possible erosion of the nation’s revenue collection capability.

Economic growth has slowed to near zero in recent years and business and consumer sentiment have plumbed multi-decade lows as political uncertainty weighs on Africa’s most industrialised economy.

Infighting within the ruling African National Congress ahead of a conference in December to elect a successor to President Jacob Zuma as party chief has also sapped investor confidence.

Additional reporting by Reuters.

(Edited by Shimoney Regter)