Half of South Africa's stimulus plan to come from spending shift – Nene

Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive

South Africa's shifting budget priorities will provide roughly half of the R50-billion ($3.5-billion) in stimulus spending it plans to make by the end of its fiscal year in March, Finance Minister Nhlanhla Nene told Reuters.

The rest of the fund would come from internal development finance institutions (DFI), he said on Wednesday, outlining for the first time the basic structure of the fund.

Nene said half of the funds would come from reprioritizing money away from underperforming government programs and the rest from internal DFIs.

"We don't want whatever is on the chopping block to be announced before the process has concluded," he said after an investor forum on the sidelines of the United Nations General Assembly meeting in New York.

The government has said it would also launch a R400-billion "medium-term" infrastructure fund, that would be spent over three years, Nene noted.

South Africa, under President Cyril Ramaphosa, who spoke at the forum, has launched a campaign to revitalize its economy which has fallen into a recession and has a 27% unemployment rate.

His stimulus plan has been met with skepticism as it does not include increased spending or borrowing to meet the goal of creating jobs and funding infrastructure programmes.

Nene said that while opposition lawmakers are skeptical, the reception from the business sector at home and in New York has been positive.

In February, Ramaphosa succeeded Jacob Zuma, whose tenure was plagued by scandal. But having stagnated for a decade, Africa's most industrialized economy slipped further in the second quarter, entering recession for the first time since 2009. The rand has weakened along with other emerging market currencies.

Land and mining ownership reforms were among the main concerns voiced by investors in New York.

Ramaphosa sought to reassure the audience that land reform "is not going to be a land grab". He said there have been over 600 000 submissions on how to proceed with reducing the concentration of land ownership.

"This will lead to a process of evaluation of proposals," he said, emphasizing land ownership was critical to the life of South Africa and its people.

On mining, Nene acknowledged there was "an acrimonious relationship" between the government and the mining houses".

But he said a new mining charter is forthcoming, perhaps by the end of November, and a law is being rewritten to remove oil and gas extraction from mineral mining, a major sticking point.

"We are now going to separate it," Nene said. EDITED BY: REUTERS