Finance Minister Pravin Gordhan said he believes there is a better than 50% chance that South Africa could avoid a ratings downgrade‚ despite the pressures on the economy.
Gordhan was speaking at the inaugural BDFM Investment Summit held in Sandton on Tuesday morning.
Calling himself an “optimist”‚ Gordhan said parts of economy were still growing and South Africa was not in a recession yet.
“We still have many things going for the economy. We are still the most sophisticated economy on the African continent.”
The ratings agencies will be back soon and would be checking up on promises made by government and labour in March – “Show us the results‚” Gordhan said they will demand.
If the ratings agencies downgrade South Africa to junk status‚ the cost of borrowing money to fund South Africa’s economy and infrastructure will skyrocket and many investment funds will have to pull money out of the country.
Gordhan admitted it would be hard to grow the economy by 2 to 3% in the next few years‚ and said: “In order of all of this to work‚ we require the institutions of our country…to have the right kind of expertise‚ the right kind of skills and the right kind of credibility and integrity.
“People will come and go‚ but institutions are what we leave behind…We need to focus a lot more to build and strengthen our institutions and ensure they become sustainable over the long-term period as well.”
The main theme of Gordhan’s speech was that the economy needed to focus on “inclusivity”‚ bringing marginalised people into the workforce.
More and more people felt they were not benefitting from growth and remained sidelined‚ he said‚ adding that businesses had to work to ensure that youth unemployment of almost 50% was addressed‚ which required “radical” change.