JOHANNESBURG - The National Treasury has given the strongest indication yet that Moody’s was unlikely to downgrade South Africa’s credit rating to junk status when it announces its opinion on the continental superpower’s economy this year.
The ratings agency put the country on review for a downgrade late last year, following a punitive decision by ratings agency Fitch and S&P Global Ratings to downgrade South Africa to sub-investment grade.
At the weekend, Treasury director-general Dondo Mogajane said they engaged telephonically with officials from all the ratings agencies last week following Finance Minister Malusi Gigaba’s contentious Budget speech.
“We met all of them on the phone (on Wednesday), the ratings agencies. The indication is that we are okay.
“We are waiting for them to formally articulate their decision. We think we did well under the current circumstances,” said Mogajane.
He was speaking at a budget review event organised by the Association of Black Securities and Investment Professionals in Johannesburg on Friday night.
In what could be described as a frank conversation, Mogajane acknowledged the “fundamental mistakes that we made” over the past years, saying: “There were key decisions that we needed to make, but did not make on time. Ten years ago, we had money, but we focussed on other things that we could have done much later.”
He spoke about revenue under collection and the fact most state-owned enterprises “are in sickbay if not ICU”.
Mogajana rallied behind Gigaba on the one percentage point increase in VAT to 15percent, saying they acknowledged the poor would be affected, but that they were under pressure to increase it.
Critics have dubbed the increase a smack in the face to millions of South Africans, who were being made to pay for a string of economic sins committed under Jacob Zuma’s controversial reign as president of South Africa.
At the weekend, it was reported that Zuma had said he never really wanted to be president and that he accepted the country’s top job with reluctance.
Mogajane tolds those in attendance at the event that they wanted to become practical with the national Budget for 2018, saying they did a balancing act.
The government would cut expenditure by R85billion over the next three years, and it has revised the 2017 gross domestic product growth projection from 0.7percent to 1percent. Gigaba said the government anticipated an economic growth of 1.5percent in 2018, 1.8percent in 2019 and 2.1percent in 2020.
Citibank director Alec Schoeman said: “This budget had to be painful The Budget tried to appease three groups: the bond market, Moody’s not to downgrade South Africa, and the people - the taxpayers. With the one percentage point increase in VAT they needed to do something big to convince the bond holders. A two percentage point increase would have been too painful.”