* Ratings agencies concerned about low growth
* Political tension also seen as a risk
* ANC picks new party leader in December
(Adds details, Moody's, Fitch comments, analyst)
By Mfuneko Toyana
CAPE TOWN, Feb 23 South Africa's Finance
Minister Pravin Gordhan said on Thursday he had spoken to credit
ratings agencies after delivering the national budget and said
it was important to take note of their views.
Gordhan on Wednesday targeted the wealthy with tax hikes in
a budget aimed at reining in a deficit after downgrade warnings
by the three major ratings agencies.
The minister faced questions from a parliamentary committee
on Thursday on the sway the agencies have over in Africa's most
S&P, Fitch and Moody's have said South Africa's credit
ratings could be downgraded if growth remains weak and
Pretoria's commitment to fiscal prudence comes into doubt.
S&P and Fitch’s both rate South Africa's credit one level
above junk status, while Moody’s puts it two notches above.
The agencies have been criticised by ruling party officials
for saying that political tension in the African National
Congress (ANC) ahead of their conference in December to pick a
new party leader could trigger downgrades.
"We don't allow them to govern South Africa ... We have
political and fiscal sovereignty," Gordhan said, in response to
a question by a member of the parliamentary committee.
"They can impose nothing on us at the moment, but if we slip
on the fiscal side they can, and we will find ourselves like
other African countries in the world at the door of the
(International Monetary Fund)."
The Treasury forecasts 2017 economic growth of 1.3 percent,
up from 0.5 percent in 2016, but still well below a 5 percent
government target. Unemployment is at a near-record 26.5
Moody's said on Thursday government drawdowns were rising
and posed increasing risks to its fiscal position, while Fitch
warned of tensions in the ANC "which are diverting political
energy from economic reform".
The Treasury is targeting a budget deficit of 2.6 percent of
national output by 2019/20 from 3.4 percent now.
BNP Paribas Securities South Africa economist Jeffrey
Schultz wrote in a note that politics remained the biggest risk
to South Africa’s investment-grade credit rating in 2017.
"Another cabinet reshuffle could scupper any progress made
on the public finances," Schultz said.
Financial markets have been rattled by media reports that
Gordhan, seen by investors as a guarantor of stability, might be
moved from the Treasury in a cabinet reshuffle. Gordhan has said
it is the president's prerogative to keep or replace him.
(Writing by Olivia Kumwenda-Mtambo; Editing by James Macharia
and Andrew Roche)