JOHANNESBURG — Finance minister Pravin Gordhan’s agreeable manner was just what South African President Jacob Zuma needed to keep the peace between warring factions of the ruling African National Congress (ANC), but his affability may ultimately cost Africa’s biggest economy dear.
When he presented the budget yesterday, Gordhan was expected to unveil a widening of the 2012 deficit, and an extended time frame for balancing South Africa’s books – laxity that is unlikely to sit well with bond markets.
Having inherited a ministry in 2009 which had a fearsome reputation for resisting pressure to spend, the treasury under Gordhan has seen a steady erosion of its powers and political clout within the ruling ANC.
“He’s seen as a technocrat,” said Azar Jammine, chief economist at consultancy Econometrix. “He was appointed partly because he is an ANC supporter, but I don’t think he’s seen as a major politician — just a Finance minister.”
When he became minister, South Africa was wallowing in its first recession in almost two decades and unions and the ANC’s communist allies were pushing for an end to the investor-friendly policies that had kept a tight lid on spending since the end of apartheid in 1994.
Having proved himself during 10 years as South Africa’s chief taxman, nobody queried his appointment on competence grounds, and all sides of the ANC saw something they liked.
Business approved his pragmatism while leftists hoped his Communist Party roots would lead to looser purse strings.
But with South Africa’s debt stock creeping up, analysts say he needs to put his foot down and outline a clear plan to cut the deficit if he wants to avoid a credit downgrade.
Two agencies — Moody’s and Fitch — cut their ratings outlooks for South Africa in the past three months.
South Africa lost a million jobs since the recession in 2009 and has only managed to claw back a quarter of those since then.
Prospects are gloomy given GDP growth forecast at a relatively pedestrian 3-3,5% over the next few years, compared to the 7% needed for significant job creation.
Under Gordhan, the budget has slipped deep into the red after two years of budget surplus under hard-nosed predecessor Trevor Manuel and the poor growth trajectory leaves him with little room to manoeuvre.