HOW THINGS CHANGE

CityPress - - Business - Justin Brown

THEN

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.”

NOW

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.” –

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