Johannesburg – South Africa's technical recession is an indication of the historical lop-sided structure of the country’s economy, Finance Minister Malusi Gigaba says.
Gigaba was speaking at a Black Management Forum (BMF) gala dinner on Friday evening in Johannesburg, under the theme “The South Africa we deserve”.
His speech came moments before Moody’s downgraded the country’s long-term foreign and local currency debt ratings one notch from Baa2 to Baa3, and gave it a negative outlook.
Moody's cited "reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms" for its reasons to downgrade South Africa.
Moments before the announcement, Gigaba explained that the institutional power to make investment decisions was concentrated in the hands of the elite few.
“We can’t have an economy where blacks aren’t key players, or where industry is not democratised and doesn’t reflect the majority of South Africa,” he said, adding that BMF must shape debates on transformation.
He said that liberation in 1994 meant that South Africa had ceased to be what former National Party prime minister and Apartheid architect Hendrik Verwoerd had once called “a piece of Europe on the tip of the African continent”, highlighting that the post-colonial state has had to fight for legitimacy since its inception.
Gigaba said that a pitfall of the national bourgeoisie was the lack of a far-reaching transformative agenda, adding that the South Africa its citizens deserved would not be built by the business as usual approach undertaken thus far.
“The post-apartheid state has been accused of being corrupt and in favour of the elite,” he said, adding that radical economic transformation did not mean state corruption, or an irrational and unconstitutional disruption of the economy.
Finance Minister Malusi Gigaba speaking at the Black Management Forum gala dinner on Friday evening. (Photo: Nation Nyoka)
He said this was an excuse used by leading corporate who refused to change the status quo, and allow for room for more talented black managers.
“The Public Procurement Bill will provide a modern legislation framework which will reshape government’s procurement function,” he said, adding that economic transformation should strategically manage the state’s estimated R500bn in annual procurement spend.
Gigaba said that ruling groups would never be willing to give up their stranglehold of the economy and that that the black middle class was relevant now more than ever, as no oppressed group had ever won its independence by having its power handed to them on a silver platter.
Gigaba called on the BMF to support mandatory audit firm rotation, a message which was well-received by the audience.
SA enters recession
On Monday, StatsSA said South Africa's economy had entered a recession, as gross domestic product had contracted by 0.7% in the first quarter of this year, threatening the projected growth of 1.3%.
Gigaba said the economy needed to be brought out of the low growth trajectory that had led the country into the technical recession.
The extreme inequality made society unstable, fractious and unsustainable, he added.
EFF lays criminal charges against Gigaba
His message comes as Economic Freedom Fighters leader Julius Malema on Friday laid criminal charges against Gigaba, President Jacob Zuma and the controversial Gupta family at the Johannesburg Central police station. The charges are for their role in an allegedly corrupt locomotive procurement scandal worth R17bn at Transnet over a tender issued in 2012.
Gigaba – who was Public Enterprises minister at the time - described the tender as “historic”, saying it would make South Africa part of at the global supply and manufacturing chain.
Gigaba reacts to ratings review
Since Gigaba’s appointment during the infamous cabinet reshuffle on March 31, he has pointed out that credit ratings opinions bear considerable weight and that government was pulling out all the stops to reassure ratings agencies and investors alike of the country’s fiscal prudence and ability to meet its financial obligations.
Shortly after the reshuffle, Moody’s placed the country on review for a downgrade, saying the reshuffle could impact progress on economic growth reforms. At the time, both Fitch and Standard and Poor’s (S&P) had downgraded the foreign currency rating to junk status.
Earlier on in the year, Gigaba announced that South Africa had paid a total amount of R28.7m over the past nine years for the services rendered by rating agency, Moody’s.