Gigaba says he will make further budget cuts as recession bites

Finance Minister Malusi Gigaba said on Thursday the Treasury was looking for ways to cut government spending further and reallocate funds to help boost growth while maintaining its fiscal target.

Gigaba, who was appointed as finance minister in March after President Jacob Zuma sacked Pravin Gordhan, a favourite of international investors, is battling a recession in Africa’s most industrialised economy.

“We do realise that there are hard decisions to be made … that may require that we look at further cuts to government spending and programmes,” Gigaba told a news conference. The Treasury was committed to the fiscal target it announced when the annual budget was adopted in February, he said.

Gigaba said hard economic times were affecting the Treasury’s plan to expand the economy.

“In this context, our 2017 growth projection of 1.3 percent may not be realised,” he said. “This continues the trend of low growth over the last several years, undermining our progress in significantly reducing inequality, unemployment and poverty.”

South Africa entered recession for the first time in eight years data showed on June 6, putting pressure on Zuma’s government just as it must cope with credit downgrades and Zuma faces corruption allegations.

Political instability, high unemployment and the ratings downgrades have dented business and consumer confidence in South Africa. Unemployment is at a 14-year high of 27.7 percent.