From the ed­i­tor

Finweek English Edition - - NEWS - JANA MARAIS

The day after for­mer fi­nance min­is­ter Nh­lanhla Nene was fired in De­cem­ber, Zim­bab­wean en­tre­pre­neur and news­pa­per pub­lisher Trevor Ncube tweeted the fol­low­ing: Many South African friends ask me: “Why did Zim­bab­weans al­low Mu­gabe to de­stroy the coun­try? My an­swer: it was a process not an event.”

I don’t think South Africa is head­ing to­wards a US dol­lar-driven econ­omy, re­gard­less of what Stan­dard & Poor’s (S&P) an­nounces on 3 June. But we should be con­cerned about the di­rec­tion we’re head­ing in.

Red flag num­ber one is the bla­tant im­punity with which this coun­try’s lead­ers are in­creas­ingly op­er­at­ing. We have a pres­i­dent who can fire a com­pe­tent fi­nance min­is­ter, re­sult­ing in mas­sive rep­u­ta­tional and fi­nan­cial dam­age for the coun­try, with­out so much as giv­ing a proper ex­pla­na­tion. We have an en­ergy min­is­ter who al­lows the cloak-and-dag­ger sale of the coun­try’s strate­gic oil re­serve at rock-bot­tom prices (the three lucky buy­ers are al­ready about R220m in the money, and the min­is­ter still has a job). We have a min­is­ter of defence who uses a state plane to pick up a Bu­run­dian woman in the Demo­cratic Re­pub­lic of the Congo and smug­gle her into SA. She will keep her job as surely as SA will get a junk rat­ing – if not on 3 June, then be­fore the end of the year.

Per­haps it’s time to stop fo­cus­ing so much on the event – eco­nomic calamity – and start putting a stop to the process that is get­ting us there: po­lit­i­cal im­punity, reg­u­la­tory un­cer­tainty, poor pol­icy de­ci­sions, no im­ple­men­ta­tion of much-needed struc­tural re­forms, and a lack of unity. Feed­back: SA for­eign debt rat­ing vs lo­cal debt rat­ing In our cover story of 2 June on the im­pact of a pos­si­ble down­grade to junk, we pub­lished the fol­low­ing sen­tence: “Should Stan­dard & Poor’s as­sign a junk rat­ing in June, many funds would be forced to sell of SA as­sets and bonds and our mar­ket would suf­fer se­verely.”

Paul Hansen, di­rec­tor: re­tail in­vest­ing at Stan­lib, says it is im­por­tant to note the dif­fer­ence be­tween SA’s for­eign debt rat­ing (which S&P cur­rently rates one notch above junk) and the lo­cal debt rat­ing (two notches above junk). Should S&P down­grade our for­eign debt rat­ing to junk, it is un­likely to have a ma­te­rial ef­fect on our lo­cal bond mar­ket, he says. A down­grade of our lo­cal debt rat­ing to junk (which is “ex­tremely un­likely” in the short term), how­ever, could lead to a forced sale of South African bonds, as the in­clu­sion of SA’s govern­ment bonds in the World Govern­ment Bond In­dex (WGBI) would then be un­der threat, ac­cord­ing to Hansen.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.