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South Africa Can Mend Its Financial Reputation -- Buthelezi At The World Economic Forum

Ferial Haffajee quizzed deputy finance minister Sfiso Buthelezi about how the government is going to mend South Africa's damaged investment story.

03/05/2017 16:02 SAST | Updated 05/05/2017 08:00 SAST
Ruben Sprich / Reuters
An attendee arrives in the Congress Hall during the World Economic Forum (WEF) annual meeting in Davos, Switzerland January 20, 2017.

President Jacob Zuma's walk of power through the World Economic Forum halls in Durban this morning was a far cry from his humiliating exit from Cosatu's May Day rally on Monday.

Twin-stepped by Finance Minister Malusi Gigaba and WEF executive Elsie Kanza, Zuma was also joined by cabinet ministers, executives and a phalanx of bodyguards who ensured the head of state was not excessively questioned by the media.

The WEF Africa meeting is being used as an opportunity by the South African government to put to right the country's investment story, which has been buffeted by politics.

South Africa's credit rating was downgraded to junk status by first S&P and then Fitch after the axing of former finance minister Pravin Gordhan and his deputy Mcebisi Jonas in a midnight reshuffle at the end of March. Gordhan will also be at the WEF on Wednesday afternoon.

The HuffPost SA caught up with deputy finance minister Sfiso Buthelezi and asked him how the government will market its ideas of radical economic transformation to the world.

Question: How has your first month gone?

Answer: It was quite a month. The President announced us (into office) on March 31. A day later, among the first presents we received was an S&P downgrade. So even before we went to the office, we had a challenge on our hands.

It was quite depressing. But it was obviously something that had been decided before us. (In meetings, the ratings agencies asked)... are we going to stick to fiscal consideration? Are we going to be populist?

We also held teleconferences with Fitch and Moody's (the other two major credit ratings agencies) on the first day in office. We told them that nothing had changed. We had to explain to them how policy is formulated in the ANC and that it's not individuals who implement these things. The policy of the ANC has been consistent from (Nelson) Mandela to Thabo (Mbeki) and now to President Jacob Zuma.

But we have to look at what has worked and what has not worked. (The policy of) fiscal consolidation and the budget we have made is owned by us; it was made by us. High indebtedness doesn't work.

There is a reason we ended up with debt of R2.2-trillion and that is because we as a government said 'let's spend' on infrastructure when the economy was choking and we managed to avoid a recession. This was an important foundation for the private sector.

Q. How do you define radical economic transformation?

A. (Buthelezi laughs before answering). When we had the roadshow to the US earlier this month, at least 30 investors all asked the same question. They said to us 'You are talking about fiscal consolidation on the one side and radical economic transformation on the other? Are they not mutually exclusive?'

We say don't get drawn into semantics and slogans. Radical economic transformation is the same as inclusive growth which is the idea at the centre of this World Economic Forum meeting. Both want to achieve the same ends. They are not anathema to each other. It's about growing the cake to include as many people as possible.

In the next three years, we will be spending R1-trillion (on infrastructure) and at least 30% of that should go to small and medium sized enterprises, BEE companies and youth-owned companies. We want to try to involve everybody.