South Africa Committed to Stabilizing Economy, Gordhan Says

South Africa's New Finance Minister Pravin Gordhan

Pravin Gordhan.

Photographer: Waldo Swiegers/Bloomberg
  • Difficult economic circumstances to persist for years: Gordhan
  • Rand seen as an important shock absorber for economy

South Africa’s government is committed to stabilizing the economy and ensuring its budget is fiscally sustainable, Finance Minister Pravin Gordhan said.

Low commodity prices are weighing on growth and difficult economic circumstances are set to persist for “more than just a few years,” Gordhan told reporters in Pretoria, the capital, on Thursday.

Conditions have altered since the release of the mid-term budget in October and “if the numbers have to change, the numbers will change,” he said. “It is quite clear that we have to take account of the new environment and we taper our expenditure and revenue decisions in line with the new circumstances in which we find ourselves in.”

President Jacob Zuma took the economy closer to the brink of a junk credit rating and sent the rand into a tailspin last month when he fired finance minister Nhlanhla Nene and replaced him with unknown lawmaker David van Rooyen. He backtracked four days later by reappointing Gordhan, who served as finance minister between 2009 and 2014, to the post.

Stabilize Ratings

The government will work with business and labor unions to stabilize the ratings on the nation’s debt and then improve them, Gordhan said. While the rand is an important shock absorber for the economy and companies should take advantage of the weaker currency to export more, the government wants to avoid wild swings in its value, he said.

After falling 25 percent against the dollar in 2015, the rand weakened 7 percent since the start of this year, the worst of 16 major currencies tracked by Bloomberg.

Gordhan is due to present his three-year budget to Parliament on Feb. 24, which will shed light on how the government will fund plans to add 9,600 megawatts of nuclear power to the national grid.  

“We have a fixed fiscal envelope and whatever we want to do has to happen within that envelope,” he said.

Gordhan aims to ensure that South African Airways appoints a new, permanent board before the release of the budget. In November, the loss-making state-owned carrier appointed Musa Zwane as its seventh acting or permanent chief executive officer in less than four years.

The National Treasury is working with SAA to ensure that it has enough money to continue operating and eventually returns to profit, Gordhan said.

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