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South African Economy in Crisis

by on February 25, 2016
 

The South African economy is ‘in crisis’ says the country’s finance minister Pravin Gordhan.
The comments came ahead of his Budget speech, in which he cut the country’s growth forecast for 2016 to 0.9%, down from 1.7%.
He conceded the economy was struggling with shrinking growth, 25% unemployment, and widespread poverty.
The South African currency, the rand, which has halved over the past five years, fell after the speech.
It dropped 2.25% to make one rand worth around $0.0639.
In a briefing ahead of the Budget, Mr Gordhan said: “There is no doubt about the fact that we are in crisis.”
The measures announced in Parliament were aimed at stopping the country falling into recession and to appease the rating agencies who have threatened to downgrade South Africa to junk status, which would raise borrowing costs for the country.
Mr Gordhan unveiled government spending cuts, a civil service job freeze and some moderate tax rises.
These tax increases affect property sales, fuel, sugary drinks, alcohol, tobacco and and capital gains, as well as environmental levies, which are expected to bring in an extra 18bn rand ($1.18bn; £840m).
He had been expected to announce plans on pprivatizingstate assets – he fell short of that but said the government was looking at the possibility of merging the loss-making national carrier, South African Airways, with the state-owned SA Express airline “with a view to engaging with a potential minority equity partner”.
Privatization has long been resisted by sections of the ruling African National Congress.

BBC

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