South Africa can regain its investment-grade rating without compromising on promises to transform the economy for the benefit of its black majority, Finance Minister Malusi Gigaba said on Wednesday.
Africa’s most industrialised economy suffered two credit ratings downgrades to “junk” last month after President Jacob Zuma sacked respected Finance Minister Pravin Gordhan.
“Even with the issues that the ratings agencies are raising with us we think that we can regain our investment grade,” Gigaba told Reuters in an interview on the sidelines of the World Economic Forum for Africa in Durban.
Since his appointment as Gordhan’s successor, Gigaba has vowed to “radically” transform the economy for the benefit of the black majority, which remains economically marginalized more than two decades after the end of apartheid.
His comments have raised concerns with investors and ratings agencies, who fear the government may shift away from the fiscal consolidation outlined in the February budget.
“The political and economic elites cannot engage in banal debates about what name we must give the economic transformation that we seek,” Gigaba said.
“At the heart of what we need to achieve is to change the structure of production and change the patterns of ownership and make those who are marginalised, most of whom are black, feel they are part of the economy.”
Some initiatives include developing small and medium-sized enterprises and cooperatives but Gigaba acknowledged that could not be done in the face of current fiscal constraints, saying the economy needed to grow first.
Treasury projects growth of 1.3% this year from 0.3% in 2016.
“What we are aiming for is a growing economy that is transforming and a transforming economy that is growing. You cannot have an either-or question. It’s a luxury we can’t afford,” Gigaba said.
S&P Global Ratings cut South African foreign debt to sub-investment grade in April, while Fitch downgraded both the foreign and local currency debt to “junk” status.
Moody’s, two notches above junk status, has put South Africa on review for a downgrade.
Gigaba, who recently met Moody’s, said the agency was concerned about government plans to grow the economy, polices such as the procurement of nuclear power, and whether there was sufficient fiscal discipline to manage the budget.
“Those are the three vital, vital issues,” he said.
