The current government “seems to derive joy at scoring own goals”, with the announcements by S&P Global to downgrade South Africa’s currency rating and Moody’s Investors Service to place the country on “downgrade review” representing a fresh setback for South Africa, Business Leadership South Africa (BLSA) said on Saturday.
“It will deliver yet another blow to an already weakened economy and negatively impact the everyday lives of millions of South Africans. Business and investor confidence in South Africa is already at a 30-year low and this will only deepen it,” BLSA said in a statement.
On Friday, S&P lowered South Africa’s long-term foreign and local currency debt ratings by one notch each to “BB” and “BB+” respectively, citing weak real nominal GDP growth that had led to further deterioration of South Africa’s public finances beyond the rating agency’s previous expectations. Nonetheless, the rating agency changed the outlook to stable from negative. Moody’s placed South Africa’s long-term foreign and local currency debt ratings of “Baa3” on a 90-day review for a downgrade. The ratings carried a negative outlook.
BLSA said events such as the two recent cabinet reshuffles, mixed messages around nuclear capability, poor numbers and a lack of direction in the medium-term budget policy statement, and most recently the resignation of Michael Sachs at National Treasury had all sent a message of instability and lack of clarity to the ratings agencies.
The latest downgrade as well as the downgrades earlier this year reflected the declining confidence in the management of the economy, the quality of institutions, and the choices made as a society. Deficiencies in these areas were making the possibility of a prosperous South Africa less and less plausible and the lives of South Africans were getting more and more expensive, BLSA said.
“The situation we are in was avoidable. Instead of pursuing stability and certainty in fiscal policy and regulatory reform, the government has become riddled with the twin cancers of corruption and state capture and put the economy of South Africa in jeopardy.”
Business believed in South Africa, and BLSA was committed to providing solutions to this crisis impacting millions of ordinary South Africans. “Our contract with South Africa sets out how business will encourage and promote inclusive economic growth and transformation. “We have also set out the conditions and roadmap by which the government can reverse the fortunes of millions of South Africans.”
This should include but was not limited to:
– eradicating state capture. BLSA repeated its call for an independent judicial inquiry to be established as recommended in the public protector’s report “A State of Capture”;
– addressing the broader economic crisis by enforcing strict fiscal discipline. This meant that government should commit to not adding big new spending programmes to existing budget plans. For example, there should be no nuclear build;
– addressing the leadership, governance, and balance sheets of critical state-owned enterprises (SoEs). This was particularly important to speed up the release of government from SoE guarantees, and therefore creating the much-needed fiscal space for spending on more pressing needs in society;
– reviewing the national budget and making the necessary adjustments. But it was vital that cuts were not imposed on key national institutions and social support systems such as grants, housing, and the expanded public works programme; and
– prioritising inclusive economic growth and job creation above all else for the sake of all South Africans. Government should commit to working with business and other sectors of society to develop an urgent economic recovery plan.
“This administration seems to derive joy at scoring own goals. BLSA has long stated that many economic and political problems South Africans experience are rooted in corruption, state capture, and political patronage resulting in trust deficit. Unfortunately, it’s the ordinary man and woman who continue to feel the impact the most with the lack of jobs, ever-increasing prices of goods and denial of basic services,” BLSA CEO Bonang Mohale said.
“Corruption and state capture continue to deny ordinary South Africans basic human rights, basic quality education, health care, housing, and job opportunities. Until our state institutions are truly independent, especially the police services and NPA [National Prosecuting Authority] to bring to book those who are implicated in state capture, confidence will remain low.
“Until there is an unambiguous declaration of abandoning [the] nuclear program and setting aside of mining charter three, the trust deficit will persist. BLSA calls upon the government to engage organised business, organised labour, and civil society to urgently work on an emergency economic recovery plan to rescue our economy from the fiscal cliff. Business believes in South Africa. We did not inherit this country from our ancestors but borrowed it from our grandchildren,” Mohale said.
– African News Agency (ANA), editing by Jacques Keet