South Africa’s Nene Sees Faster Growth and Smaller Budget Gap

JOHANNESBURG (Capital Markets in Africa) – South Africa’s economy will expand faster and the fiscal deficit may be smaller than the estimates set out in the February budget, Finance Minister Nhlanhla Nene said.

Gross domestic product will grow more quickly this year than the 1.5 percent predicted in the budget, Nene told lawmakers in Cape Town on Tuesday, without giving a new forecast. The fiscal shortfall for the year to March 2018 could be “marginally lower” than 4.3 percent of GDP, he said.

Cyril Ramaphosa’s election as the African National Congress’s leader and president of the country boosted sentiment and the rand in an economy that hasn’t expanded at more than 2 percent since 2013. The Reserve Bank has raised its 2018 growth forecast to 1.7 percent from 1.2 percent last last year, citing improved business and consumer confidence.

The better growth prospects are “due to the better global growth rates, but we must not be lulled into a false sense of security,” Nene said.

Ramaphosa changed the cabinet in February, removing ministers implicated in corruption linked to the Gupta family, who are friends with former President Jacob Zuma, and appointing Nene as finance minister to replace Malusi Gigaba.

Below Target
Nene said in April the budget shortfall may be about 0.1 percentage point smaller than projected even as tax revenue for the period was slightly below target.

The reduced deficit number is due to lower-than-expected spending outcomes, which “means that the expenditure ceiling has not been breached,” he said on Tuesday. Bailouts for troubled state companies such as Eskom Holdings SOC Ltd. and South African Airways have raised risks that the Treasury will breach its spending limits.

The Treasury’s interventions at these state companies are aimed at stabilizing their financial positions and limiting the government’s exposure to these entities, Nene said.

Source: Bloomberg Business News