South Africa May `Easily' See 2%, 3% GDP Expansion, Gordhan Says

(Bloomberg) -- South Africa “could easily see” its economy expand by 2 percent to 3 percent in the next year or two as the government tackles graft at state-owned companies and implements plans to create jobs, Public Enterprises Minister Pravin Gordhan said.

“There are strong winds of change in South Africa” since Cyril Ramaphosa was appointed the nation’s president in February, Gordhan said in an interview on Bloomberg Television in Cape Town Wednesday.

South Africa’s gross domestic product expanded 1.3 percent in 2017 from a year earlier, and the rate hasn’t exceeded 2 percent since 2013 as political and policy instability due to some of former President Jacob Zuma’s decisions hurt investor confidence, curbing the recovery in Africa’s most-industrialized economy and prompting both S&P Global Ratings and Fitch Ratings Ltd. to cut the nation’s debt to junk.

Ramaphosa’s administration is working to improve governance at state-owned companies such as power producer Eskom Holdings SOC Ltd., ensuring they have operating models that make them “fairly self-sufficient” and that they aren’t a financial burden on the state, he said. Procurement processes “have been hijacked” and the new president “has set out new directions and imperatives” to ensure state companies do their jobs, Gordhan said.

Ratings companies including Fitch say the utility, which faces a financial crisis exacerbated by weak power demand and allegations of graft, is a major risk to the nation’s fiscal targets. It’s the biggest recipient of state guarantees at 220.8 billion rand ($19 billion), the National Treasury said last month in its budget where it raised taxes and announced spending cuts to curb state debt.

To contact the reporter on this story: Guy Johnson in London at gjohnson87@bloomberg.net.

To contact the editors responsible for this story: Anastasia Ellis at aclubb@bloomberg.net, Ana Monteiro, Hilton Shone

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