CLOSE X
Advertisement

Economists believe SA can turn things around

Economy
Shanghai - Economic commentators believe all hope is not lost for South Africa after the downgrading of its foreign currency ratings to sub-investment by international rating agencies.

Standard & Poor’s (S&P) lowered the country’s foreign currency ratings to junk status, which led to seven banks suffering a similar fate.

Many economists contributed to a panel discussion yesterday, saying South Africa could rise from this bad situation if it got its act together.

Share this story
President Jacob Zuma's latest cabinet reshuffle saw Malusi Gigaba become finance minister and Sfiso Buthelezi his deputy. Picture: Reuters

Lesiba Mothata, chief economist of Investment Solutions, said the rand and bonds did not decline sharply after the downgrade.

Countries such as South Korea, Hungary and Thailand have fallen into junk status and lost policy direction, which is not the case with South Africa.

He said South Korea lost the ability to raise taxes with currency falling and the banking sector in crisis. Columbia was also in junk status with drugs and wars.

“The situation looks different in South Africa; the issues are not exogenous. We have prospects to be fallen angels and can turn around things if we do the right things.

Read also: 5 things you must know about SA's junk status

“Our banks are capitalised and the Treasury as an institution continues with clear transparency and vision.

"South Africa has shown an agile response from the Treasury,” Mothata said.

Momentum

Azar Jammine, chief economist of Econometrix, concurred with Mothata that there was still hope for the country.

He said the rand had shown resilience, although it could have been around R12 against the dollar.

“The story is not over. What is worrisome may be an opportunity as well. If [Finance Minister] Malusi Gigaba keeps saying the things he has been saying in the last few days, we may renew the momentum of recovery and avoid recession."

One of the positives was the confidence in business that the former finance minister Pravin Gordhan had inspired.

Rabelani Dagada, member of the Joburg's mayoral committee of finance, warned: “If we are downgraded further, it would be difficult for the city to borrow as the debt would be expensive to service. We will be squeezed and affected on our quest to deliver infrastructure.”

Dennis Dykes, chief economist of Nedbank, said South Africa was consuming more than it could produce and had been relying on investment to fill the gap. There was a need for fiscal sustainability, making the ease of doing business better and reducing unemployment.

Moody’s was expected to announce its decision in June, and a downgrading was feared. But Dykes said even if the country went into recession, the government could respond in a positive way to speed up the recovery. 

XINHUA

Share this story
Advertisement
X