Finance Minister Enoch Godongwana on Tuesday spelled out the extensive damage that would be done to the economy and the livelihoods of many South Africans should the allegation that SA sold arms to Russia be confirmed.
Godongwana was delivering his budget vote speech on Tuesday.
There were four principal channels through which the SA economy would be affected, he said.
‘The first is the currency channel. That has already played out merely on the perception of what may have happened. There is still the trade channel and potential supply chain disruptions. There is the investment channel and its impact on foreign direct investment and there is also the liquidity channel.
‘At this stage, we are assessing the quantitative impacts on these channels. We must be alive to the fact that uncertainty increases the risk profile of SA, increasing the cost of borrowing and the cost of doing business. Further, the impact on any of our export sectors – such as agriculture or manufacturing – will also have labour market consequences. Handling this matter poorly will impact on the livelihoods of many people in the relevant companies and sectors.”
Godongwana said that the National Treasury had first learnt of the incident in January during the visit of US Treasury Secretary Janet Yelland.
‘She raised this quite sharply with us. It was new (to us) and we took it up with the relevant people in government. We are fully aware of the harmful effects of any US or EU sanctions and we will work with the EU to prevent such measures against any of our institutions… SA is non-aligned and our policy is not to sell arms to any party in the conflict.’
Dire situation
Godongwana also sounded a sombre note of realism on the state of the economy and SA’s public finances, which he said had deteriorated significantly since the budget.
“Major developments” since the February budget have had a significant and adverse impact on SA and its public finances, and the country is in a “dire economic situation”.
His remarks implied that the projections of economic growth and inflation in the budget are no longer likely to materialise. However, the Treasury only officially revises its growth, budget deficit and inflation projections twice a year: at the budget and with the tabling of the medium-term budget policy statement in October.
Treasury’s growth projection for 2023 was 0.9% while the SA Reserve Bank revised its outlook to 0.3% in January.