File picture: Philippe Wojazer/Reuters
Johannesburg – South Africa has not yet experienced the full impact of the downgrades to "junk" status by ratings agencies S&P Global and Fitch, mainly because of US dollar weakness and other global conditions, the Banking Association South Africa (Basa) said on Saturday.

Nevertheless, Basa welcomed the decision by ratings agency Moody's on Friday to keep South Africa’s sovereign ratings above sub-investment grade. "This is good news in the midst of the recent news of our economy being technically in recession. However, we must not be lulled into a sense of complacency that detracts from addressing the critical issues that led to downgrades to 'junk' status [by S&P Global and Fitch]. We also warn that Moody's has SA on a negative outlook," Basa MD Cas Coovadia said.

"We have not yet experienced the full impact of the downgrades by S&P and Fitch primarily because of dollar weakness and other global conditions. Also, SA’s improved agricultural output has helped reduce inflation, which has helped keep interest rates steady. The South African economy, however, has sunk into recession.

"The medium to long-term impacts of these downgrades will be significant and will put additional pressures on an already weak economy. We thus need a sense of urgency from government to address critical blockages, most of which are in government's domain," he said.

The failure by government to deal with concerns relating to certainty around key economic policy areas, significant ongoing uneasiness around leadership, and an outright failure to successfully implement efforts that grow the economy or create jobs all pointed to a bleak future despite South Africa narrowly avoiding a third junk-status downgrade.

Unemployment was at its highest levels in over a decade and real GDP had begun to contract. Both factors pointed to the impact of these earlier ratings downgrades and reaffirmed the very real social and economic shock that was already affecting all South Africans.

"In the absence of clear political leadership and policy certainty, Basa remains convinced that it is incumbent for business, labour, and civil society to work jointly in the national interest of our country," Coovadia said.