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Ministers react to Budget 2016

Trade and Industry Minister Rob Davies. [Image:Bloomberg] Trade and Industry Minister Rob Davies. [Image:Bloomberg]

Trade and Industry Minister Rob Davies says this year’s budget has affirmed that South Africa has taken a tougher stance on its fiscal consolidation, which should go a long way in restoring confidence.Reacting to Finance Minister Pravin Gordhan’s 2016 budget speech, Davies said that all eyes will be on credit rating agencies to see if they will retain South Africa’s current sovereign investment grading.

“That will be an issue that will be the call of the ratings agencies. I think that at least on the side of fiscal consolidation, more ambitious and a deeper set of consolidation backed up by some real reforms, for example, the state owned enterprises.That side of it should be something that they take into account positively,” he said.

President Jacob Zuma, in his reply to a debate on the State of the Nation Address last week, said avoiding a sovereign investment credit downgrade was a top priority and government would work with the private sector to stimulate investment and to ensure that the downgrade is avoided.

On the slowing of the economy, Davies said the budget showed that South Africa was a diverse economy that can look at capitalising on areas where it is more competitive.

“The other one is the growth story, I think the Minister showed … areas where we have strengths in South Africa. We are more diversified than simply a mining economy. We do have opportunities and we are building on those and some of our programmes have given effect to the measures that we have introduced in the past that are beginning to have results.”

“So I think we have got things going for us and hopefully that will be enough to convince the ratings agencies,” said Davies.

Gordhan announced wide-ranging cost-containment measures, which included a freeze on non-critical vacancies of administration and managerial posts.He said government will reduce its expenditure ceiling by R10bn in 2017/18 and by R15bn in 2018/19 to respond to new spending needs.

National Treasury said the reductions have been distributed to compensation budgets across national and provincial government.

Public Service and Administration Minister Ngoako Ramatlhodi said the austerity measures were in line with a key Cabinet decision.

“We have taken a decision as Cabinet that we don’t want to borrow and finance a cheaper debt with a more expensive debt.So we have decided to take measures that helps us achieve those objectives. To that end, I think it is a good thing because we don’t steal from the future. We give future possibilities to flourish by suffering now and hopefully recovering in the process,” Ramatlhodi said.

Gordhan also touched on the performance and financial sustainability of state-owned companies (SOCs) – saying it was no longer necessary to invest in four airlines.He hinted at exploring the possibility of merging SAA and SA Express.Public Enterprises Minister Lynne Brown said there was a need to find a better way of managing SAA.

“We are a long-haul destination and I have always said that we need a strategic partner in a long haul destination.I think this is all part of the overall SOC reforms. The SOCS must be all efficient, they must operate the economy better because they are the backbone of the economy. The issues that we have raised are quite important ones.It is quite crucial for us to make sure that the state-owned companies within my domain and broader in the rest of government works,” Brown said. 

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