Rating downgrade on the cards

Eric Naki

The decision by SA fund manager Futuregrowth Asset Management not to lend money to major stateowned enterprises (SOEs) such as Eskom and Transnet has put the country on the path to an imminent rating downgrade, a leading economist said.

Econometrix chief economist Azar Jammine told The Citizen yesterday South Africa could not escape the downgrade by rating agencies in the light of the recent developments. He put the blame squarely on the move by the Jacob Zuma faction within the ANC to take control of SOEs.

A good performance by the rand against the US dollar precipitated two fuel price decreases, in August and one due this month, that set positive sentiment in the country’s economy.

But Zuma’s shock announcement that the SOEs will be controlled by a presidential council chaired by Zuma himself has received universal condemnation, with some critics saying the entities will fall into corrupt tenderpreneurs’ hands.

“The likelihood of a downgrade increased a lot, especially after the decision by Futuregrowth not to lend money to state entities,” Jammine said. “The agencies will see this as a signal and say if the local lenders are unwilling to fund the SOEs, how can the world have confidence in them?”

He said a downgrade could only be prevented if Zuma resigned in the light of mounting pressure for him to do so.

See Page 27