The politics behind Gigaba's gamble
Why Gigaba is shooting blanks
The finance minister may have salvaged some personal credibility in exposing the truth of SA’s fiscal decline but he has put the country on the fast track to further downgrades. This will make it even harder to restore to fiscal sustainability
Finance minister Malusi Gigaba shocked the nation last week by laying all SA’s fiscal cards on the table. He showed that the Zuma administration has backed SA into a fiscal crisis and that if the status quo is allowed to continue, the country will be in debt distress within a few years. The financial markets were appalled by the deterioration in SA’s debt metrics and the absence of any plan by Gigaba to take evasive action. The rand peaked at R14.24/US$1 on Thursday before pulling back slightly, while bond yields climbed above 9%. It now seems inevitable that S&P Global Ratings and Moody’s will junk SA’s local-currency ratings, possibly as soon as November 24. If so, SA will be ejected from the World Government Bond Index, which could precipitate up to R130bn in capital outflows. The market reaction was entirely predictable. So why did Gigaba, whose own credibility as finance minister hangs by a thread, take such a gamble by presenting SA’s fiscal situation in the least flattering l...
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