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UPDATE 1-South Africa's weak growth threatens government spending plan - Treasury
October 3, 2017 / 1:43 PM / 2 months ago

UPDATE 1-South Africa's weak growth threatens government spending plan - Treasury

(Adds treasury quote, details)

CAPE TOWN, Oct 3 (Reuters) - Weaker-than-expected growth is threatening the South African government’s spending plans, the National Treasury told parliament on Tuesday.

In a presentation to lawmakers, Treasury officials said the likelihood of missing its forecast of 1.3-percent expansion in 2017 could hit its plan to borrow more to fund expenditure.

The department is facing a large revenue gap after two quarters of contraction that ended with marginal growth in the second quarter of 2017. Average expansion is forecast around 1 percent for the next three years.

Data on Friday showed government recorded a 13-billion-rand budget deficit in August following a 92-billion-rand shortfall in July, stoking fears the country may face deeper credit downgrades.

“Government must continue to do more with less whilst directing government spend towards programmes that create jobs, eliminate poverty and narrow the inequality gap,” said the Treasury presentation to parliament.

The Treasury is under pressure to follow through on a fiscal consolidation plan outlined in February which included bringing down the budget and borrowing deficits, as well as weaning state firms off government bailouts of around 500 billion rand ($36.36 billion).

Last week the Treasury used an emergency government provision to provide ailing South African Airways (SAA) with a second bailout for the year, drawing criticism from the opposition parties who said the move put the country’s credit rating at risk.

Moody‘s, Fitch and S&P Global Ratings all slashed the country’s ratings following President Jacob Zuma’s abrupt decision to sack well-respected Pravin Gordhan as finance minister in a midnight cabinet reshuffle in March. ($1 = 13.7506 rand) (Reporting by Wendell Roelf; Writing by Mfuneko Toyana; Editing by James Macharia)

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