February 25, 2016.
For Creamer Media in Johannesburg, I’m Sane Dhlamini.
Gordhan points economy in right direction, but serious risks remain.
The DA says Gordhan didn't do enough to avert junk rating.
And, Moody’s welcomes SA government cuts in spending.
Economists and analysts have cautiously congratulated Finance Minister Pravin Gordhan on his 2016 budget speech, which they said signalled some moves to take the economy in the right direction, but warned of serious risks ahead.
Ratings agency Standard & Poor’s Africa regional manager Konrad Reuss said the National Treasury delivered a conservative budget, which was to be appreciated, but the negative outlook was not going to go away.
Reuss added that government still needed to address the backlog around key legislation, including labour.
Standard Chartered Bank MD and head of Africa Macro Research Razia Khan said South Africa needed to create a buffer around global risks, with more confidence needed in policy direction.
He said Gordhan’s speech had been an important start.
Minister of Finance Pravin Gordhan has not done enough to avoid a sovereign ratings downgrade in South Africa, according to the DA.
DA shadow minister of finance David Maynier said that rating agencies were monitoring several “risk areas” including economic growth, fiscal consolidation and the finances of state-owned enterprises.
He said measures to boost economic growth and create jobs in particular were lacking in the budget.
Maynier said the DA believed the primary economic growth driver in the National Development Plan was infrastructure development, and that a total of 10% of gross domestic product should be spent on infrastructure development in terms of the National Development Plan.
Credit rating agency Moody’s welcomed Finance Minister Pravin Gordhan’s cuts in government spending and tax increases. However, it said Gordhan had not yet provided details on how he would achieve smaller deficits, and added that his growth forecasts were optimistic.
Moody’s Senior Vice President, Kristin Lindow said South Africa’s 2016/17 budget aimed at delivering faster fiscal consolidation in part by cutting the large civil servant wage bill while preserving growth-supporting capital spending.
Moody’s also viewed the planned tax increases as well-targeted given the weak economic backdrop.
However, the agency said the specific revenue measures that would accomplish the smaller deficits predicted for 2017/18 and 2018/19 had not yet been identified.
Moreover, it said Treasury’s revised growth forecasts of 0.9% and 1.7% were still slightly more optimistic than Moody’s own predictions of 0.5% for 2016 and 1.5% for 2017.
Also making headlines:
Nersa had postponed a briefing scheduled for today to announce the outcome of its deliberations on Eskom’s Regulatory Clearing Account application – it would now make its determination known on Tuesday, March 1.
South Africa's rand weakened today after a budget speech by the finance minister that failed to convince investors the country was on track to turn around its bleak growth prospects.
And, Outa chairperson Wayne Duvenage questioned why government had increased the general fuel levy by 60c over two years, but couldn’t add another 9c to cover e-tolls.
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That’s a roundup of news making headlines today