Johannesburg – The downgrade of South Africa’s credit rating by international rating agencies Fitch and S&P Global provide a clear signal that the country is going to have to pull together like never before to overcome its economic problems, the African National Congress said on Sunday.
"A credit rating, being a measure of how likely the country will be able to repay its loans in full, is not an unimportant indicator of the state of the economy," ANC national executive committee sub-committee on economic transformation chairman Enoch Godongwana said in a statement on a discussion document for the ANC's upcoming 4th national policy conference.
Furthermore, a deterioration in South Africa’s credit rating would have a major negative impact on the country’s ability to raise debt funding to fund its development programmes, he said. "This is particularly critical given the low levels of domestic savings.
Achieving an investment grade status was one of the greatest successes of the ANC government after we took over a fully junk status in 1994.
The ANC needs to mobilise collective action by all South Africans – in the private sector, labour, and in government – to do everything necessary to bring the country back to investment grade.
"The essential messages that were conveyed by the rating agencies were that we need to deal with the structural challenges of the South African economy, including dealing with sluggish growth.
"Secondly, we need to deal with concerns around contingent liabilities from SOEs [state-owned enterprises]; these threaten the state balance sheet and by extension the financial stability of the nation. The other message from these agencies is that the most recent [cabinet] reshuffle has sent a signal of political instability and policy uncertainty," Godongwana said.
Among the proposed steps in the discussion document was a renewed focus on growth enhancing policies required to reverse South Africa’s economic fortunes. Growth was critical to raising the potential for socio-economic development within the country.
"An immediate and the key issue is to stabilise the outlook for governance in our state institutions, ensure that SOEs are financially sustainable, and address policy uncertainties.
"The ANC must work together with all spheres of government as well as the other key role players in the economy, including organised business and labour, to ease operating conditions so that firms can continue to be supported in this period. We will seek solutions to ensure a co-ordinated rehabilitation plan on the economic circumstances that led to the current situation.
"Convene an economic round table with all key stakeholders to discuss substantial issues affecting the economy, particularly aimed at achieving the objective of lifting investment levels to 30 percent of GDP. These roundtables will be held at regular intervals.
"We will do everything possible to ensure that low-income workers, poor households, and vulnerable groups are cushioned from any adverse impact that may result from the current situation.
This may include supporting firms with limited access to credit finance located in historically under-serviced areas and those that have capacity to employ large sections of unskilled labour to ensure they continue operations during this time. Assist firms to improve access to export markets in the region.
"Government departments will have to optimise their efficiency programmes in order to effectively support increased economic activity. Government will maintain its commitment to supporting growth and job creation.
"Improve efforts to reform the governance of state-owned enterprises. In particular, streamline the process of appointing CEOs and boards and clarify accountability lines, while indicating that merit-based appointments and transparent performance pay regimes are non-negotiable," Godongwana said.