A further credit rating downgrade is on the cards the longer South African President Jacob Zuma stays in power, says political analyst Jakkie Cilliers.
The chairperson of the Institute of Security Studies (ISS) board of trustees and the group’s head of African futures and innovation, made the argument in his latest research report titled “South Africa’s prospects under Cyril Ramaphosa”.
“The likelihood of a further downgrade by Moody’s will be dramatically reduced with the early recall of Zuma and the appointment of a new cabinet, including a new finance minister able to inspire confidence,” Cilliers noted.
He pronounced that the recall of Zuma was one of the key decisions now confronting the ANC’s newly elected national executive committee (NEC).
The top six of the NEC are currently in KwaZulu-Natal, Zuma’s stronghold province, on their first official visit believed to be part of behind-closed-doors’ discussions of Zuma’s recall.
“The longer Zuma stays in power the better the opposition parties can be expected to do in 2019,” Cilliers said.
However, Cilliers believes that given the narrow victory of Ramaphosa at the ANC’s 54th national elective conference last month, and the balance of power in the NEC, Zuma may have earned a few months longer as president of South Africa.
Cilliers said Zuma and “his incoherent, large cabinet”, including “inexperienced” Finance Minister Malusi Gigaba, should be recalled soon to avoid a further downgrade of South Africa’s long-term local currency debt ratings.
“With Zuma and Gigaba in their current positions a downgrade remains highly likely. In fact, shortly after the election of (Ramaphosa) Moody’s commented that the new leadership raises the prospect of an improvement in SAs ratings, but warned that ‘the narrow victory limited his ability to implement promised reforms’,” Cilliers said.
Moody’s is the only leading rating agency that has maintained South Africa’s rating above junk status.
Once South Africa’s long-term local currency debt was downgraded by Moody’s, growth would remain constrained for years and the target of 5% growth by 2023 or an average growth rate of 5.4% to 2030 as set out by the National Development Plan would be unachievable, Cilliers added.
He lashed out at the Zuma-Gigaba alliance, saying that the announcement only hours before the start of the ANC conference to provide free higher education “clearly demonstrates the risks associated with the irresponsible leadership of Zuma and the potential damage he could wreak in the months ahead”.