Mboweni targets debt ahead of polls

Tito Mboweni, delivering the medium-term budget statement to parliament, said South Africa "stood at a crossroads", facing rising public debt, low growth and record unemployment.

"We cannot continue to borrow at this rate," he said. "We must choose to reduce the structural deficit."

President Cyril Ramaphosa, who took power when Zuma was forced out over graft allegations in February, has pledged to revive the listless economy by attracting $100 billion in foreign investment and fighting corruption.

A judicial inquiry is currently probing allegations that Zuma oversaw the systematic plunder of state coffers and of state-owned enterprises during his nine years in power.

"We must repair damaged government institutions, as their failure impacts poorer households the most," Mboweni said.

"There have been governance challenges at key state institutions. State institutions are being repaired and renewed, but serious governance problems exist."

Mboweni is the country's fifth finance minister in three years after his respected predecessor Nhlanhla Nene resigned just two weeks ago.

Nene stood down after admitting undisclosed meetings with the Gupta business family at the heart of graft allegations against Zuma.

Mboweni on Wednesday slashed South Africa's 2018 growth forecast from 1.5 percent to 0.7 percent.

"For ordinary South Africans, it has become a difficult time," he said. "Prices, such as electricity and fuel, have risen. Unemployment is unacceptably high.

"Poor services and corruption have hit the poor the hardest."

Maarten Ackerman, chief economist at Citadel, said rebuilding confidence would help "the big issue of how do we get investment back into the country". 

"This has been the underlying reason why for the past couple of years we haven't created any jobs in mining and  manufacturing because investment dried up." 

- 'Money goes missing' -

The country, Africa's most industrialised, is in recession, with voters buffeted by soaring fuel prices and a weak local currency.

Unemployment is stubbornly high at about 28 percent -- rising to over 50 percent for young people.

Mboweni is seen as a pro-business fiscal conservative whose appointment boosted investor support for Ramaphosa.

But trade unions, which wield influence within the African National Congress (ANC), are staunchly opposed to austerity policies or government lay-offs.

The National Union of Mine Workers called Mboweni "unlawful and reckless" this week for saying 30,000 job losses would be needed to rescue state electric utility Eskom. 

Mboweni, 59, sought to draw a line under the Zuma era.

"Too much money goes missing... Money that leaks out of the system is no longer available to support our efforts to reduce poverty," he said.

The ANC's shrinking popularity was highlighted at local polls in 2016 when it lost control of three key cities, including the capital Pretoria, and won its smallest ever share of the vote.

The main opposition Democratic Alliance said the Mboweni had announced a "full-scale budget blowout" of indebtedness likely to force up taxes.

Debt is forecast to stabilise in 2024 at 60 percent of GDP, with the budget deficit widening to 4.2 percent next year.

Moody's, the only ratings agency that still has South Africa at investment grade, could soon review its position.

"The conversation that has to take place with the ratings agencies has to be an honest one," Mboweni told journalists before his speech.