South Africa Promises Belt-Tightening Before Budget, Radebe Saysby
Minister in presidency says executive must cut spending, wages
Radebe says ratings downgrade would reverberate across economy
South Africa’s administration will reduce spending by trimming government costs even as it seeks to maintain social and infrastructure expenditure, Minister in the Presidency Jeff Radebe said hours before the country’s budget is presented in parliament.
“The key thing is that we need to live within our means,” Radebe said in an interview at the Bloomberg Africa Business and Economic Summit in Cape Town on Wednesday. “We cannot spend what we don’t have. Belt-tightening is the key word. As the executive, we need to show the way of how we can limit our expenditure in terms of cars, accommodation and in terms of salaries.”
Finance Minister Pravin Gordhan will try to restore investor confidence and avoid a credit-rating cut to below investment grade when he announces the 2016 budget on Wednesday. Standard & Poor’s has a negative outlook on its rating of BBB-, the lowest investment grade. Fitch Ratings has an equivalent assessment on South African debt, with a stable outlook, while Moody’s Investors Service rates the nation two levels above junk.
President Jacob Zuma and Gordhan have been meeting with business leaders and investors to try and restore confidence after Zuma in December replaced his finance minister at the time, Nhlanhla Nene, with a little-known lawmaker. The president brought in Gordhan, an investor favorite, four days later.
Business leaders “want certainty and to ensure that the National Development Plan must be effectively implemented,” Radebe said, referring to a program that outlines ways of reducing a 25 percent jobless rate and reviving sluggish growth.
The International Monetary Fund, World Bank and South African Reserve Bank have all cut their 2016 economic growth forecasts to less than 1 percent, and Gordhan will probably reduce the government’s current projection of 1.7 percent.