Picture: Mark Lennihan/African News Agency (ANA) Archives

Johannesburg - The decision by Moody’s ratings agency not to review South Africa’s credit rating gives the country breathing room to fix the fiscus and take hard decisions about the structural changes needed to create an environment for investment and inclusive economic growth, the Banking Association South Africa (Basa) said on Saturday.

"While the government is doing much to restore leadership and good governance in key state institutions, economic reforms are moving at a perilously slow pace, given the unsustainable levels of unemployment, poverty, and inequality in the country, Basa said in a statement.

South Africa should urgently increase the pace of reforms that reduced the cost of doing business, especially for small enterprises; ensure the efficient and affordable development of key business infrastructure; improve productivity, efficiency, and accountability in the public service; and reduce the budget deficit by taking urgent steps to discontinue unaffordable and redundant programmes.

Also, policy uncertainty remained a concern across the economy. Decisive political leadership was needed to deal with the economic logjam. Ideology had to be aside and the financial and operational crises at state-owned enterprises resolved, in part by facilitating private investment and expertise.

Government also had to move faster to remove obvious economic stumbling blocks, by finalising the tourist and work visa regimes and making the telecommunications spectrum available, among other initiatives.  

"These are among the ‘quick wins’ that can help to make South Africa a destination for foreign direct investment. We can no longer afford to delay implementing reforms necessary for inclusive growth and job creation," Basa said.

The alternatives were dire. The credit rating of banks was linked to that of the country. Banks raised funds from domestic and international markets for the sustainable infrastructure projects and commercial business ventures necessary for inclusive economic growth. If South Africa was downgraded to ‘junk’ status by all the major rating agencies, the increased cost of credit would curtail private sector investment and the government’s ability to provide essential social services.

"Continued weak economic growth remains the greatest threat to South Africa’s credit rating. The South African Reserve Bank predicts tepid growth, of well under two percent, until 2020. This can only change if government acts decisively now. No matter the coming election, if we continue to squander economic opportunities because of narrow political interests, South Africa will not be in any better position when the next credit rating review rolls around later this year," Basa said.

African News Agency/ANA