The rand continues to weaken against the US dollar and euro after S&P’s April 3 down- grade of South Africa’s sovereign credit rating to BB+, following President Jacob Zuma's sacking of Pravin Gordhan as finance minister on March 31. Tampering with the Treasury comes at a time when there is much political bickering in the country. Photo: EPA
Our voluntary participation in the global economic system in which we find ourselves as a relative small player implies that, rather than trend-setting, we are effectively rule-takers.

Based on 2015 figures, the country closest to our economic size within the Brics grouping is Brazil, which has about six times our gross domestic product.

As some other analysts have put it, in the Brics formation, we are the diminutive "s".

While the likes of China and Russia, the two major Brics economies, remain manifestly committed to global capitalism, and its workings, one wonders how South Africa, alone, can chart a completely alternate economic path that challenges the likes of S&P's and still get away with it.

In this financial architecture, second-guessing and trying to discredit rating agencies is futile, especially at a time when we should be reflecting on what has just happened to South Africa Inc, in order to take the necessary remedial measures. Love them or hate them, the rating agencies’ calls have a bearing on the domestic state of affairs. For a nation like ours, that is a great deal. South Africa’s sovereign debt stands at R2.2 trillion.

In order to service this debt, the country incurs R169 billion per annum in interest payments. There will be a deficit of R149 billion this year to finance government spending. The rating agencies’ call will have an impact on the cost of financing this deficit.

We cannot eat the proverbial cake and still want to have it. For now, any attempts to act as if we can dominate the markets and become our own standard, without submitting to the instruments of global capital markets, are delusional at the least and economically suicidal at the worst.

The unkind capitalistic global markets, so fickle and programmed to accept only a certain kind of vocabulary, tend to be viciously averse to notions such as "radical economic transformation". It is a loaded idea which may suggest fiscal activism, perhaps without the requisite prudence and discipline.

It may be language palatable to the masses. However, notions of radical transformation attract almost certain reaction such as what S&P's has just done, rating South Africa’s investment grade as "junk".

Attempts to sound revolutionary, using populist language, are either untimely or ill-advised. This means that we either commit to adhere to certain economic management imperatives or declare that we are no longer that open market economy we have been purported to be.


The jeopardy is doubled when the tampering with sensitive institutions such as the Treasury comes at a time when there is so much political bickering.

Voices that often claimed that the Treasury was not applying enough fiscal activism to accelerate growth, end poverty and promote greater equity, would thinly cover their criticism of the stance former finance minister Pravin Gordhan and Nhlanhla Nene before him, took as they staunchly touted fiscal discipline.

Nothing had masked this proclivity that others have linked to what has now gone down as the notion of "State Capture". Coupled with several other executive missteps, in spite of the warnings from the rating agencies, it was but just a matter of time that South Africa would be mired in this crisis.

How we are going to recover depends on how quickly we can convince the markets of our commitment to stay the course, on the path of fiscal discipline.

The government assurance of ‘fiscal policy continuity’ is almost hollow at this stage, as it begs the question why Gordhan was removed in the first place.

Read also: S&P first to give SA 'junk' rating

Some quarters have even challenged that bowing to the dictates of rating agencies feels like outsourcing of the management of our economy to foreign entities at a time when we are an independent sovereign nation. However, in today’s world, any claim of absolute sovereignty has to be backed by a deep reservoir of political capital, with the masses behind the leadership as it makes very hard economic decisions.

The going certainly tends to get tough, once such an alternate path to the Washington Consensus is chosen. Perhaps Zimbabwe may not be an exactly fitting case in point, but one gets the idea of what happens to those nations that do not "toe the line".


Genuine sovereignty comes at a price of, among other things, forgoing the foreign tastes we have become accustomed to in consumer goods and comforts, both luxury and basic. The path to sovereignty, where rating agencies would become irrelevant, is one paved with unpopular sacrifices of austerity.

Until we have figured out how we will care for the ordinary folk on the plaas, the elderly lady looking after a string of grandchildren, the patient requiring imported medicines and surgical equipment, the uncharted alternate fiscal route seems highly perilous.

Today, Obamacare remains the law in the US, not because it is affordable and efficient, but because, so far, there has not been a better replacement. Donald Trump has learned his lesson in a humbling manner. Perhaps only his ego got bruised. However, what is at stake for South Africa is much more.

Moulana Ebrahim I Bham is the secretary-general of the Jamiatul Ulama South Africa, the council of Muslim theologians based in Johannesburg. He is also the imam at Newtown’s Hamidia Masjid.