* Finance minister says political risks not that serious
* But central bank head says politics blocking policy reforms
* ANC leadership battle unnerving investors (Adds finance minister, central bank governor comments)
By Mfuneko Toyana
JOHANNESBURG, Oct 12 (Reuters) - South Africa’s finance minister and central bank governor will head to Washington this weekend to meet ratings agencies and international investors in an effort to boost growth in an economy that is emerging from recession.
The Treasury said on Thursday that Finance Minister Malusi Gigaba would use the meetings during the International Monetary Fund and World Bank annual conference to convince investors and ratings firms the economy was improving.
In a television interview in Washington with South Africa’s SABC television, Gigaba said the Treasury would fall short of revenue targets it set in February and that it would have to reduce spending and plug the shortfall.
“We are in a really tight economic situation,” Gigaba said, adding that he was dealing with a financial and governance crisis at state-owned companies that threatens to trigger deeper credit downgrades. “Another downgrade would be really severe for the economy,” he said.
Moody‘s, Fitch and S&P Global Ratings all downgraded the country’s sovereign credit rating, the latter two to sub-investment grade, after President Jacob Zuma fired Pravin Gordhan as finance minister in March.
All three agencies have warned that low growth and state companies that rely on government bailouts pose significant risks to the country’s ratings.
They are also concerned about political jostling before a conference of the ruling African National Congress party in December to replace Zuma.
“From where we stand, the political risks are not as adverse as they are being made out to be, because ultimately South Africa is a democracy,” Gigaba said.
But in another interview, with Bloomberg television in Washington, Reserve Bank Governor Lesetja Kganyago said political turbulence was preventing policy reforms needed to revive the economy.
However, he said, improving global growth and a weaker rand had helped narrow the country’s current account deficit, leaving the economy less vulnerable to money leaving the country if the Federal Reserve raises U.S. interest rates.
Last week, the bank said the economy would have grown by about 2 percent in 2016, rather than the actual growth of 0.3 percent, if two finance ministers had not been fired in two years, sapping investor confidence.
The World Bank on Wednesday kept its 2017 economic growth forecast for South Africa at 0.6 percent, and said the economy would expand below 2 percent in 2018 and 2019, warning the country needed to rein in political uncertainty.
On Tuesday, the IMF said it expected South Africa’s economy to grow by 0.7 percent this year, down from a forecast of 1 percent given in July. It blamed political uncertainty for damaging consumer and business confidence.
The leadership contest to replace Zuma as head of the African National Congress party has spawned different rival factions and no frontrunner, increasing political uncertainty. Zuma can remain head of state until an election in 2019. (Editing by James Macharia, Larry King)