Gigaba's budget might not be enough to stop credit downgrade: Nene

File: The new finance minister was sworn in on Tuesday, less than a week after Malusi Gigaba deliver the budget speech. Photo: eNCA

CAPE TOWN – Newly-appointed Minister of Finance, Nhlanhla Nene, said his predecessor's budget might not have been enough to stop further credit ratings downgrades. 

Nene made the comments to Talk Radio 702 after being sworn in on Tuesday.

He returns to the portfolio after being fired by former president Jacob Zuma in December 2015, a move that sent the economy into a tailspin. 

Nene replaces Malusi Gigaba, who delivered the budget speech less than a week ago. 

The state of government finances forced Treasury to take the politically risky step of raising value-added tax (VAT) for the first time in 25 years.

READ: SARS praises Nene's return as finance minister

The move was welcomed by ratings agencies and markets priced in expectations that it would enable South Africa to hang on to its last investment grade rating in a Moody's review due soon.

After being sworn in, Nene said he would meet ratings agencies soon. "It is too early to say," he told Reuters when asked whether he thought Moody's would downgrade South Africa's credit rating at the end of March.

S&P and Fitch downgraded South Africa's ratings to sub-investment grade in 2017, after Zuma fired Pravin Gordhan from his second stint as finance minister.

Market reaction to the cabinet shake-up was muted but there has been a strong rally since Ramaphosa was elected ANC president in December, with the rand gaining 14 percent since then, hitting three-year highs on Monday.

READ: Rand steady after Ramaphosa's cabinet reshuffle

Asked about his priorities, Nene told Reuters: "I will still have to sit down and familiarise myself with the budget."

During his previous time as finance minister, Nene was keen to rein in spending. He was loath to rubber-stamp Zuma's plan to build more nuclear power stations for up to $100-billion (over R1-rillion), a project Ramaphosa has said South Africa cannot afford.

After he was sacked, Nene worked in the private sector, including as a board member at fund manager Allan Gray.

- Additional reporting by eNCA


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