Moody’s downgrade strengthens the case for a snap debate on the economy in Parliament
TMG Digital | 2017-06-10 12:36:01.0
The national assembly.
Image by: Anton Scholtz
The decision by Moody’s to downgrade South Africa’s sovereign credit rating to “Baa3”‚ with a “negative outlook”‚ is more bad news‚ in a string of bad news‚ and is a clear vote of no confidence in finance minister Malusi Gigaba and President Jacob Zuma‚ the Democratic Alliance says.
DA finance spokesman David Maynier said the decision by Moody’s highlighted the fact that “political developments” had had a negative effect on “institutional strength” which “casts doubt over the strength of and sustainability of the recovery in growth and stabilisation of the debt-to-GDP ratio over the near term”.
“The ratings action means our long-term local currency debt‚ which forms 88.2% of our R2.2 trillion net debt‚ now hovers dangerously at one notch above ‘junk status’‚ with a negative outlook‚ following ratings actions by the two most important ratings agencies‚ Moody’s and Standard & Poor’s.
“We will not sit back and do nothing when the economy has slipped into recession‚ and when a staggering 9.3 million people do not have jobs‚ or have given up looking for jobs‚ in South Africa.
“And that is why we have written to the Speaker of the National Assembly‚ Baleka Mbete‚ calling for a ‘snap debate’ on measures to deal with the recession‚ ratings downgrades and mass unemployment in South Africa‚” Maynier said
In other reaction to the downgrade‚ the Banking Association of South Africa (BASA) said the decision by Moody’s to keep the country’s sovereign ratings above sub-investment grade was “good news in the midst of the recent news of our economy being technically in recession”.
However‚ the country must not be lulled into a sense of complacency that detracts from addressing the critical issues that led to downgrades to “junk” status.
“We also warn that Moody’s has SA on a negative outlook‚” said BASA MD Cas Coovadia.
Boirth West University School of Business and Governance economist Professor Raymond Parsons said to restore SA’s investment credentials would require tangible and urgent progress on issues like rebuilding investor confidence‚ maintaining viable public finances and strengthening institutions in the period ahead.
“The rating agencies will be visiting SA again at the end of the year. If key conditions do not therefore begin to improve over the next few months‚ it raises the risk of another downgrade‚” he warned.