Treasury recognises damning impact of energy crisis

A resolution of the energy
crisis could add 0.8%-1% to
South Africa's gross domestic
product (GDP), Lungisa
Fuzile, director-general at
the National Treasury, told
delegates last Friday in his
closing address at the Metals
and Engineering Indaba held
in Johannesburg.
“Government has made
significant progress in
resolving the energy
constraints that have been
curbing industrialisation
in South Africa, including
a R200-billion investment
in renewable energy
programmes for the
2016/2017 financial year,” he
said.
“We are neither blind
to, nor ignorant of, the
challenges the manufacturing
industry is facing and
we know that energy
constraints have been
holding back growth – which
has impacted investment
perception,” said Fuzile.
He added that government
recognised the “vital” role
that manufacturing played
in forming the basis of a
modern economy. “It is far
more important than its
current 12.4% contribution
to the GDP as it impacts the
development of our structural
changes, builds skills and
knowledge, drives innovation
and is a big foreign currency
earner,” he said.
According to Fuzile,
because of recent
government intervention,
the manufacturing sector
is expected to grow by an
average of 11% per annum
over the next decade or so,
helping South Africa to move
up the global value chain.
This helped to build a
resilient economy, thus
encouraging foreign
investment, added Fuzile,
commenting that this
was why government had
earmarked R16.2 billion in
the medium-term budget for
manufacturing incentives.
He told FTW on the
sidelines of the conference
that government was “doing
whatever it takes” to avoid
a ratings downgrade by
agencies Fitch and Standard
& Poor’s (S&P) – both of
whom are expected to make
a ratings decision early this
month.
“We are working closely
with labour and business
to find resolutions to all
the challenges and we are
committed to preserving
investment and ensuring
stable credit rating outlooks,”
said Fuzile.
Both agencies have the
country just one level above
junk status. This is in
contrast to Moody’s which
earlier this month kept the
country’s rating two notches
above junk, placing it on a
“negative outlook”.
A local market analyst told
FTW that the Moody’s rating
needed to be taken with
a “pinch of salt” as it was
generally more positive than
Fitch and S&P.
CAPTION
High hopes … director-general of the National Treasury,
Lungisa Fuzile.