Siyabonga Mkhwanazi
Minister in the Presidency Jeff Radebe has raised fears of a downgrade by rating agencies, urging the state to pull together to prevent this.
Radebe told a media briefing at Parliament yesterday, before his budget vote, that stagnant growth was keeping the country on the edge.
His fears of a downgrade come as Finance Minister Pravin Gordhan meets rating agencies in Washington before the release of their review results in June.
Rating agencies Standard & Poor’s and Fitch are coming to the country next month to conduct their review programme. This will follow the rating review done by Moody’s last.
Radebe said South Africa was not out of the woods, and projections by the SA Reserve Bank showed a growth rate of 0.8 percent this year.
This is in line with other projections by the National Treasury, the World Bank and International Monetary Fund, which all revised their growth rate to less than 1 percent.
“We have a toxic combination of very slow growth and high inflation (stagflation), with the latter prompting the Monetary Policy Committee (of the SA Reserve Bank) to raise interest rates, which will put growth recovery under severe pressure,” said Radebe.
“There is a danger that our sovereign credit rating will be downgraded by rating agencies.”
He said these were difficult times for South Africa, but all parties needed to pull together to get the country out of trouble.
He said the government’s nine-point plan would reignite growth and the results would start showing in the next two years.
Radebe has become the first minister in the cabinet to openly express fears of a downgrade two months before the review.
However, Gordhan was confident that things would work out for the country.
The agencies have questioned South Africa’s economic recovery and political stability. The judgment of the Constitutional Court and allegations of state capture by the Gupta family were raised by economists as destabilising factors.
The Hawks’ investigation into the so-called rogue unit within the SA Revenue Service has also rang alarm bells.