By Tiisetso Motsoeneng
JOHANNESBURG (Reuters) - South Africa will launch an inquiry into weak tax collection by the revenue service after receiving the approval of President Jacob Zuma, Finance Minister Malusi Gigaba said on Tuesday.
Gigaba shocked financial markets last month by flagging wider deficits and rising government debt in a closely watched budget speech, attributing the dismal forecasts to sluggish growth and low tax receipts.
On Tuesday he told a news conference that Zuma had granted his request for an inquiry by a judge into the administration and governance of the South African Revenue Service (SARS).
He added that the inquiry would be set up soon.
"It is critical for government to determine the cause of the tax revenue under-collection in order to enable government to take urgent remedial steps to ensure that SARS is able to meet its revenue targets," Gigaba told reporters.
South Africa's strained public finances are in the spotlight ahead of ratings reviews scheduled by major international agencies Moody's and S&P Global later this month.
If Moody's and S&P downgrade South Africa's local-currency rating one notch to sub-investment grade, or "junk" status, that could trigger forced selling of up to $12 billion of the country's bonds.
The gloom is compounded by allegations of influence-peddling in government that have hurt investor confidence, as well as infighting in the ruling African National Congress as it prepares to elect a new leader to succeed Zuma in December.
Zuma's two terms as president have seen growth slow to a near-standstill and have been marred by a series of corruption scandals, including over spending of state money on upgrading his private Nkandla home.
Gigaba also addressed concerns about struggling state-owned South African Airways (SAA) on Tuesday, saying liquidity issues at the national airline had been attended to.
SAA relies on government guarantees to keep it solvent and has been cited by the ratings agencies as a threat to South Africa's public finances.
Introducing new board members appointed to help turn around SAA, Gigaba said there were many investors interested in taking an equity stake in the airline and that he wanted to consolidate its assets.
He said: "We will continue ... to have discussions about the strategic equity partner for South African Airways because ultimately we are going to need not only private sector capital, but also expertise for us to move forward and bring SAA back to sustainability."
(Reporting by Tiisetso Motsoeneng; Writing by Alexander Winning; Editing by Raissa Kasolowsky)