Nhlanhla Nene, the Finance Minister of South Africa, said on February 27 that the budget unveiled by his predecessor in the third week of February may be insufficient to stave off more downgrades in the credit ratings. This happens at a time as Cyril Ramaphosa, the new South African President, tries to kickstart the country's economy. The President, after his inauguration, has hailed the developments as “new dawn” post his inauguration. He has also pledged to combat corruption.
On the edge
Both Fitch and S&P in 2017 downgraded the credit ratings of South Africa to the sub-investment grade. This happened after Pravin Gordhan was sacked from his finance minister post by Zuma. Gordhan was then enjoying his second stint in the post.
The government finances have been in such a state that the Treasury was compelled during the last third week of February to adopt the politically risky move of raising the VAT or Value Added Tax for the first time within a span of 25 years. The rating agencies welcomed the move. Markets added in expectations that it will enable South Africa to cling to the investment grade rating it had in a Moody's review. The rating is expected to be published soon. The nine-year rule of Zuma was riddled with allegations of rampant corruption and economic mismanagement. The former president has washed off his hands of any wrongdoing.
On the path
The president announced that Nene will return after a reshuffle which witnessed the removal of a few ministers linked to Jacob Zuma, the former President of South America. Nene was fired from his finance minister position by Zuma. The latter served as finance minister for about a year- starting from May 2014 and ending on December 2015. He was questioned during a radio interview whether the budget will resist any more downgrades. This is crucial as increased downgrades will make it difficult for South Africa to borrow.
Nene came back to the Finance Ministry after the African National Congress (ANC) ordered Zuma to resign from his position. Ramaphosa came in Zuma's place during the first week of February. The former told traditional South African leaders in parliament that land reforms should be immediately attended to. He also informed that the government has begun discussions with the mining sector regarding a brand new industry charter. The ANC continues to be under pressure when it comes to redressing the racial disparities on the issue of land ownership. South African whites continue to own a majority of the land.