Durban - While South Africa celebrates the resignation of former president Jacob Zuma, economists warn the damage done to the economy in the nine years of his presidency was so severe, it is unlikely to reverse the decision by ratings agencies to further downgrade South Africa’s credit rating.
This is the view of independent economist Dawie Roodt who said there was a strong possibility that Moody’s and Fitch would announce further downgrades later in the year opening the door to higher interest rates further tightening the noose around the collective neck of consumers.
Neil Roets, CEO of Debt Rescue, said the next hammer blow to strike consumers will be finance minister Malusi Gigaba’s budget speech on February 21 during which he is expected to announce radical steps to plug the government’s R50-billion plus budget hole through increased taxes and possibly even a higher VAT rate.
“There is no doubt that although there is a sense of elation that we may be seeing the beginning of the end of state capture and widespread corruption, we are nonetheless in for a very rough ride before we will start picking the fruits of Cyril Ramaphosa’s presidency,” Roets sad.
He said the fact that there had been a marginal decrease in the unemployment rate recently, the real figure of workers who were sitting idle at home and the many who had given up looking for jobs remained disturbingly high.
“There has been a disturbing increase in the outstanding debt that consumers have ratcheted up. Debt counselling and debt review has for a growing number of South Africans become the last remaining option of hanging on to their meagre belongings while they repay their debt in smaller amounts over a longer period of time,” Roets said.
He pointed out that more than half of all South Africans are three months or more behind in their debt repayments, collectively owing some R1.73-trillion.
He said that while he fully expected the economic situation to improve over time, consumers would have to exercise patience.
“The damage done to every aspect of the economy by Jacob Zuma has been so severe and so deep rooted that it is going to take years rather than months to reverse. The economy will not begin to recover before we see the guilty put in jail and those in government and in state owned enterprise fired for misconduct," he said.
“There is no doubt that there are massive amounts of investment capital parked overseas waiting to be brought to this country to be invested in multiple sectors of the economy. This, however, is not going to happen before investors are satisfied that the situation has been turned around and that South Africa has once again become a safe investment haven.”
Roets pointed out there was also a likelihood of growing dissatisfaction with the government’s lack of service delivery which could manifest itself through increased protest action.
“The harsh reality is that in order to get the country out of the hole in which it finds itself thanks to the massive maladministration of the Zuma government, we are all going to have to pull together and do our best to grow the economy based on sound economic principles of hard work and prudent investments,” Roets said.