Finance minister Malusi Gigaba’s 14-point plan to pull South Africa out of recession was a flop – offering nothing to promote economic growth, says research analyst at Nomura, Peter Attard Montalto.
Instead, the plan’s key words – ‘implement’, ‘review’, and ‘finalise’ – all relate to existing policies that have been in the pipeline for some time, which have long been factored in by the market.
According to Attard Montalto, Gigaba’s plan appears to reach for ‘easy wins’ to boost growth, but because of the current political climate in the country – and with an elective conference fast-approaching – any real reforms that could actually stimulate growth are politically unavailable.
“We were looking for a ‘rabbit out of a hat’ moment as some political capital was expended, but that did not come, and hence we see nothing here to satisfy investors and markets,” the analyst said.
“The question is, will ratings agencies be satisfied by this? We think the answer is no. The issues in this plan have already been discussed with them. We don’t think they will find anything new here.”
Economist at Investec Asset Management, Nazmeera Moola told Talk702 that in the current environment, “given the sclerosis in government ahead of the ANC elective conference at the end of the year, my expectations are very low.
“If they manage to get some real progress on state owned companies through, I will be positively surprised.”
There is at least one ratings agency that may prick up its ears at Gigaba’s plan, however – the historically optimistic Moody’s, which many give Gigaba and South Africa the benefit of the doubt as it has before.
Even in this case, though, it will not result in a positive movement, Attard Montalto said, but rather a delay in the group’s timelines, where it will perhaps wait to see what comes of the implementation of the plan.
“Ultimately, we think the growth needle not moving will be enough to secure further downgrades,” he said.