Junk status reprieve no cue to relax

Finance Minister Pravin Gordhan. Picture: Leon Lestrade

Finance Minister Pravin Gordhan. Picture: Leon Lestrade

Published Jun 4, 2016


Johannesburg - The next six months will be critical if the country is to improve its growth prospects and preserve its investment-grade credit rating, the Treasury has said after ratings agency Standard & Poors (S&P) became the second of the big three institutions to grant South Africa a reprieve from a feared downgrade to “junk status”.

“The rating outcome demonstrates that South Africans can unite, especially during difficult times, to achieve a common mission,” the Treasury said, referring to efforts by the government, business and labour in recent months to convince investors that the country could turn its fortunes around.

This partnership would intensify efforts to restore confidence and boost investment among local and international investors, unblock obstacles to faster employment growth in key sectors, and carry out fiscal and regulatory reforms, as well as reforms to state-owned companies.

“United effort towards concrete delivery in these priorities will lay a solid foundation for all South Africans to break through, in a sustainable manner, the cycle of poverty, inequality and unemployment,” the Treasury said.

Its comments followed confirmation from S&P yesterday that it would keep the country’s long- and short-term foreign and local currency bond ratings at BBB-/A-3 and BBB+/A-2, one notch and three notches above sub-investment grade, while maintaining a negative outlook.

A statement issued on behalf of 90 business chief executives also noted the “encouraging news”, but emphasised it was merely “one milestone on the road to ensuring growth at levels necessary to meaningfully address unemployment, poverty and inequality”.

“We are thus energised by the ratings announcement to work even harder together to ensure inclusive growth,” the CEOs said.

They said the integrity of institutions, including the Constitutional Court, Office of the Public Protector, the National Prosecuting Authority, and security institutions was critical to investor sentiment.

“Rating agencies, in our engagement with them, have stressed the importance of these institutions to sustainable economic growth and the crucial need for them to remain transparent, independent and impartial,” they said.

Banking Association of SA managing director Cas Coovadia said the country had a long way to go to prove it was on a sound financial footing and economic trajectory.

“However, under the leadership of Finance Minister Pravin Gordhan, there are positive signs that we are beginning to chip away at the implementation of budget consolidation and structure economic reforms to boost the economy.”

Coovadia said the decision was an affirmation of the collective effort by the government, business and labour to take concrete steps to avert a ratings downgrade, control and improve public expenditure and debt levels, achieve higher levels of economic growth, attract and retain investment, create jobs, and reduce unemployment.

“Our collective efforts continue to pay dividends,” Coovadia said.

Saturday Star

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