JOHANNESBURG - To mitigate an unavoidable negative outlook by Moody’s Investors Service, economists said yesterday that South Africa needed to drive private sector-led economic growth while the government fixed state institutions. 

Moody’s, the only international ratings agency that still has South Africa’s credit rating above junk, has pronounced a low likelihood of a credit rating downgrade, albeit with a negative outlook. 

With the finance minister’s medium-term budget policy statement set to outline the country’s trajectory, economists maintain that a downgrade remains unlikely but the outlook might be revised down. Speaking at the inaugural JSE SA Trade Connect conference yesterday, Alexander Forbes chief economist Isaah Mhlanga said they expected a negative outlook from Moody’s due to weak economic fundamentals. 

“We expect a negative outlook due in part to lower economic fundamentals being worse than National Treasury expectations, and increased debt costs related to state-owned enterprises (SOEs),” Mhlanga said. “We have to accept that all of the solutions available to us are longer-term, structural measures.” Mhlanga said the private sector had largely stayed on the sidelines of economic activity while expecting government to provide all the answers to the economic crisis. 

“The private sector can make an impact if it stands together and speak up. The private sector can criticise, but it can also pose solutions and take the lead.” Investec chief economist Annabel Bishop said South Africa was more at risk as the global economy slowed, especially since the country had eroded fiscal space during the past decade. 

“At the moment there is a big risk premium in because (investors) are already worried about our debt escalating, and Eskom issues,” she said. 

However, Bishop said the government was doing something about fixing the economy and considering private equity stakes in SOEs, adding that these activities would have a positive impact on confidence in the medium term. 

She said there was a commitment by the private sector to ignite the appetite of foreign investors, but this was dependent on the government guaranteeing security of electricity and water supply. “Restoring efficiency at the SA Revenue Service would help in terms of confidence; we need to sort out Eskom and hear what the debt rescue plan is, and plans for other SOEs,” Bishop said. 

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