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South Africa Economy May Be Bottoming Out
World Economy

South Africa Economy May Be Bottoming Out

South Africa may be over the worst of its economic downturn with potential growth of over 1% next year, Finance Minister Pravin Gordhan said on Monday, noting President Jacob Zuma had expressed confidence in him.
Speaking to reporters on the sidelines of the FT Africa Summit, Gordhan also said the country, which is teetering on the lowest investment grade ratings rung, hoped to avoid a downgrade to junk, Reuters reported.
“We predict over 1% next year,” Gordhan said.
He declined to comment on this year’s growth expectations, saying he would talk about this at the end of October.
He earlier told the summit: “We are going through a difficult economic patch at the moment, but we may well have bottomed out.”
Recent data seems to bear out that optimism, with growth in the April-June period at 3.3%, the highest in six quarters. The economy shrank 1.2% in the three months to March.
The economy and currency are also under pressure from reported friction between Zuma and Gordhan, who is popular with investors and business.
Gordhan has been the subject of a probe by an elite police unit investigating his role in a spy unit within the revenue service. Opposition parties have described the probe as a “witch-hunt”. Zuma denies a rift between him and Gordhan.

 Downgrade Worries
Despite such worries, South Africa had no trouble raising money in international markets last week, selling a two-tranche bond totaling $3 billion, taking orders far in excess of that.
Gordhan said it was too early to say whether South Africa would sell more Eurobonds.
“Let’s see. We normally have a ceiling of 10% for foreign borrowing and we stick to that and see what opportunities arise,” he said.
A major potential headwind for South Africa is the possibility of a credit ratings downgrade to “junk” or sub-investment grade. A downgrade would mean that more conservative funds will be forced to sell South African assets.
Asked how worried he was about a downgrade, Gordhan said he would not want to see that happen.
“We have put a lot of hard work in to ensure that we present a united national front and also that we communicate a lot better,” he said.
Fitch and SP Global Ratings both score South Africa at BBB-, the lowest rung on the investment ladder. Both agencies hold a negative outlook on the rating and the next round of reviews is due in December.

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