SA focused more on growth than spending cuts – Gordhan

2013-03-11 16:46

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South Africa is more focused on lifting economic growth and reducing inequality than cutting spending to appease investors, Finance Minister Pravin Gordhan has said.

Gordhan also told an investment conference the government was concerned about volatility in the rand, which has hit four-year lows against the dollar on worries about the impact of strikes in the key mining sector.

Africa’s top economy last month cut its 2013 growth forecast to 2.7% from 3%, with lower revenue seen leading to a wider budget deficit of 4.6% of GDP for 2013/14.

South Africa would maintain social spending at levels that improved living conditions for millions of mainly black people still mired in poverty nearly two decades after the end of apartheid, Gordhan told a Bank of America Merrill Lynch conference.

“We don’t want to impose austerity on the South Africa population, and so while we are lowering the rate at which growth is taking place in our expenditure, we are not breaking into negative territory,” Gordhan said.

“Our focus needs to be in the growth area, and both government and the private sector need to focus our minds on that. That (GDP) number 2.7 needs to grow beyond 3% as quickly as we can.”

Moody’s, Fitch and Standard & Poor’s have all cut South Africa’s credit rating in the past few months, citing an uncertain domestic outlook worsened by wage strikes that have hit output at the world’s largest platinum producer.

Today diversified miner Exxaro Resources said workers at two more mines in South Africa had gone on wildcat strikes, bringing the total number of mines affected by work stoppages to five.

“In the mining sector, one of the lessons over the past few months is clearly that we cannot see digging shafts as separate from the labour relations system and the living conditions in which our people find themselves,” Gordhan said.

The labour strife that has persisted since August has translated into volatility in financial markets, with investors quick to pull out of the local bonds and sell the rand on news of new boycotts.

“Generally, we don’t want to see the kind of volatility that we see at the moment,” Gordhan said, blaming this partly on the financial crisis in the eurozone, which absorbs about a third of South African exports.

“Not resolving the banking crisis in Europe as quickly and as assertively as the Americans have done is doing a huge amount of damage to the globe.”

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