HOW THINGS CHANGE
February 25 2000 marked the first time that S&P Global upgraded South Africa to investment-grade status.
At the time, Thabo Mbeki was president and Trevor Manuel was finance minister. This is what S&P Global said then: “The upgrade reflects the government’s success in building a credible economic policy framework, which, in turn, is laying the groundwork for an improvement in South Africa’s trend rate of growth.
“With modest budget deficits, inflation declining and a cyclical upturn in output under way, President Thabo Mbeki’s administration has stepped up the pace of structural reform.
“Importantly, privatisation of state enterprises should accelerate in coming years, helping to keep the public debt burden in check, attract more substantial flows of foreign equity investment...
“Faster growth should begin to ameliorate South Africa’s socioeconomic inequalities, although these are likely to remain formidable for many years to come.”
On April 3, S&P Global dropped South Africa into the trash by downgrading the country’s investment status to “junk”.
Jacob Zuma holds the presidential office and Malusi Gigaba is finance minister. This is what S&P Global said this week: “The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk.
“This has increased the likelihood that economic growth and fiscal outcomes could suffer.
“The rating action also reflects our view that contingent liabilities to the state, particularly in the energy sector, are on the rise, and that previous plans to improve the underlying financial position of Eskom may not be implemented in a comprehensive and timely manner.
“In our view, higher risks of budgetary slippage will also put upward pressure on South Africa’s cost of capital, further dampening already modest growth.” –