Cape Town - National Treasury has moved to soothe concerns by ratings agencies about government spending and populist policies, following the local government elections.
The ANC suffered embarrassing losses in the elections, held on Wednesday last week, as support for the party nose-dived from 61.9% in 2011 to 53.91% in 2016.
“Increased political competition, as indicated by South Africa’s local election results so far, has the potential to boost reform momentum in the run-up to the 2019 national elections, but spending pressures are also likely to rise,” it said.
However, it added that lead to an improvement in economic policies and service delivery.
“Over the medium to longer term, this would indicate a shift from redistributive policies towards more growth oriented economic management and effective service delivery,” said Moody’s.
Fitch warned about possible populist policies.
“The pronounced drop in support for South Africa's ruling African National Congress (ANC) in the nationwide municipal elections on 3 August increases the risk of more populist government policies,” Fitch Ratings said.
“However, our base case remains broad policy continuity.”
On Monday, the National Treasury reaffirmed government’s fiscal policy stance as articulated in the 2016 budget speech.
Listen to the voice clip by Treasury director-general Lungisa Fuzile on policy continuity by government:
"Government remains committed to implementing fiscal consolidation and returning public finances to a sustainable path while protecting core social and economic programmes."
It said government’s track record of achieving fiscal targets lends weight to future fiscal plans, in particular that of maintaining the expenditure ceiling over the medium term.
"Furthermore, government remains committed to its economic reform agenda that is aimed at raising the level and inclusivity of economic growth. The collaboration with business, labour and the civil society to restore and maintain confidence in the economy and address the structural constraints to economic growth will continue."
National Treasury outlined key initiatives that government is focusing. These include:
- Unblocking obstacles to faster employment growth in key sectors;
- Undertaking reforms in State-Owned Company (SOCs);
- Continuing to invest in economic infrastructure through public-private partnerships;
- Expanding the independent power producer programme.
"Fast-tracking the implementation of these reforms will ensure that challenges of poverty, inequality and unemployment are addressed effectively."
The National Treasury added that it is also committed to strengthening municipal finances through budget reform and technical support initiatives and working with cities to accelerate investment in urban development.Read Fin24's top stories trending on Twitter: Fin24’s top stories