March 5, 2018 / 2:25 PM / a year ago

South Africa likely to raise growth forecast, finance minister says

PRETORIA (Reuters) - The South African government is likely to raise its forecast for economic growth in October’s medium-term budget as it completes reforms to boost growth and stabilise ailing state companies, Finance Minister Nhlanhla Nene said on Monday.

FILE PHOTO - Nhlanhla Nene is sworn in as Minister of Finance in Cape Town, South Africa, February 27, 2018. REUTERS/Sumaya Hisham

The economy of Africa’s most industrialised country has struggled in recent years, weighed down by low business and consumer confidence amid political and policy uncertainty.

The economy slipped into recession last year for the first time since 2009. It has also declined in indexes that measure corruption and the ease of doing business.

The Treasury said in February that GDP growth of 1.5 percent is expected this year, up from an estimated one percent last year, helped by a recovery in agriculture and improved investor sentiment.

“We do not want to be overly optimistic about these numbers. At the moment, they are pencilled in, but we are likely to revise these numbers upwards come the medium term budget in October,” Nene told a union meeting in Pretoria.

Nene said the 2018/19 budget delivered by his predecessor, Malusi Gigaba, in February would help to support faster economic growth by finalising many reforms.

South Africa is grappling with reforms in agriculture and mining as the government tries to redress racial disparities in ownership of the economy two decades after the end of apartheid - leading to uncertainty in the key sectors.

President Cyril Ramaphosa said last week that land reform needed to be attended to “immediately” and that the government was starting talks with miners over a new version of an industry charter.

Parliament on Tuesday backed a motion seeking to change the constitution to allow land expropriation without compensation to hasten the transfer of land from white to black owners.

Ratings agencies have warned slow economic growth and poor finances at state-owned firms such as power utility Eskom were a threat to the sovereign’s credit ratings.

Nene said he met ratings agency Moody’s on Monday and discussed economic growth and the balance sheets of state companies.

“It’s not possible to read the body language of the agencies ... and it’s not possible to spin the story. What’s important is to present a credible story and ensure that there is more of implementation,” Nene told a media briefing at the union’s meeting.

Moody’s - the only major agency still rating South African debt investment grade - is due to publish its review this month.

Eskom Chairman Jabu Mabuza told the same meeting that Eskom will appoint a permanent chief executive by the end of April to begin the reforming the ailing utility, which may include reducing job numbers.

Writing by Olivia Kumwenda-Mtambo, editing by Larry King

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