Pravin J. Gordhan | Q&A
In December of 2016, we interviewed Pravin J. Gordhan. The following questions begot meaningful insights into his views and projections in our investors, economy and the value of the Rand.
WHAT DO YOU THINK NEEDS TO BE PUT IN PLACE IN THE SHORT- AND MEDIUM-TERM TO ENCOURAGE INVESTOR CONFIDENCE AND STRENGTHEN THE RAND?
South Africa is facing a difficult global and domestic economic environment. Downside risks to global growth dominate. Domestically, SA looks set to grow at less than 1% this year.
In adjusting to somewhat lower economic growth, South Africa is also adapting to changing patterns of global opportunity and pressing development challenges. A competitive, diversified and more inclusive economy is essential to improve trade performance, expand and sustain job creation and strengthen revenue generation. South Africa’s strategy for increased employment and growth and lower income inequality is set out in the NDP, and elaborated in a wide range of government programmes and policy documents. The budget gives practical expression to these plans for the three-year period ahead.
It is critical that we should continue to raise confidence in the stability of our systems, ensure policy certainty in order to raise investment confidence, reignite growth and tackle our triple challenges of poverty, inequality and unemployment. Collaborative efforts between government, business and labour have already paid dividends by helping to stave off a downgrade in June. These have created conditions for confidence in the economy such as the SMME Fund and youth employment, advances made in electricity supply.
WHAT DO YOU SEE AS THE REAL EFFECTS OF BREXIT FOR SOUTH AFRICA – AND WILL THESE ONLY BECOME APPARENT IN 2017?
The macroeconomic impacts of Brexit will largely depend on the nature and timing
of the exit to be localised to the United Kingdom (UK) at present, with recent economic data sending mixed signals. However, the downside risk posed by Brexit remains large. The lasting impact of Britain’s actual exit in a few years will largely hinge on the nature of the trade and investment treaties negotiated with the EU and other trading partners. The structural impact of Brexit on South Africa will only become apparent as these negotiations become clear.
The UK is an important investor and trade partner for South Africa and authorities stand ready to work with one another to minimise the disruption. The UK accounts for 3.65% of South Africa’s total trade and 4.12% of SA’s total exports. SA’s biggest trading partner in the EU is Germany followed by the UK, which accounts for 20% of SA’s exports into the EU. In relation to agriculture products, it accounts for 25% of SA’s agriculture exports into the EU market. From a macro perspective, this is particularly important given the labour absorption in the agricultural sector.
In 2015, SA exported R41.6-billion worth of products into the UK and imported R35-billion with a R6.6-billion trade balance in favour of SA. Whilst we expect that there will be more clarity in 2017, the timing of the Article 50 negotiations will have a critical impact. In
the interim, worsening investor sentiment related to Brexit could affect emerging market assets, including South Africa, as will shifting expectations of US monetary policy. Our efforts to boost confidence and promote growth domestically will help minimise the impact of this volatility on South Africa.
Excerpt from an exclusive interview with Topco Group Editor Fiona Wakelin, as published in Top 500 – South Africa’s Best Managed Companies, 8th Edition.