SA’s situation was avoidable
SHOWS DECLINING CONFIDENCE Government has become riddled with the twin cancers of corruption and state capture and put the economy of South Africa in jeopardy, says BLSA.
The downgrade to junk status by Standard & Poor’s on Friday evening showed just how poor we’ve become as a nation in managing our finances. SA’s only saving grace appears to be that the decision was so widely anticipated, it was already priced into its currency and bond yields.
In response, National Treasury issued a statement indicating that any real detail regarding reigning in government spending will only be provided in the 2018 budget speech. It added:
“Restoring business and consumer confidence, and catalying inclusive growth is the top priority of government. To this end, government is working urgently and diligently on practical steps to provide the necessary policy certainty, an environment conducive to investment, and predictability that the country so desperately needs. Decisive actions in managing government expenditure and closing the revenue gap are critical for achieving sound public finances.
“In the MTBPS chapter on fiscal policy, we indicated that additional spending cuts or tax increases of R40 billion (0.8% of GDP), would be required from 2018/19, in order to stabilise public debt below 60% of GDP over the next decade. Over the next two weeks, the PFC and Cabinet will consider a package of measures to this effect, to be implemented from 2018.”
Business Leadership South Africa (BLSA) offered a diagnosis of the problem:
“Events such as the two Cabinet reshuffles, mixed messages around nuclear capability, poor numbers and a lack of direction in the medium-term budget policy statement, and most recently the resignation of Michael Sachs at National Treasury, have all sent a message of instability and lack of clarity to the ratings agencies.
“The downgrade announced on Friday, as well as the downgrades earlier this year, reflect the declining confidence in the management of our economy, the quality of our institutions, and the choices we are making as a society.
“Deficiencies in these areas are making the possibility of a prosperous South Africa less and less plausible and the lives of South Africans are getting more and more expensive.
“The situation we are in was avoidable. Instead of pursuing stability and certainty in fiscal policy and regulatory reform, government has become riddled with the twin cancers of corruption and state capture and put the economy of South Africa in jeopardy.”
BLSA reiterated its call for an independent judicial inquiry into state capture and urgency in dealing with state-owned entities’ leadership and governance.
CEO Initiative president Jabu Mabuza said: “The negative ratings that the country has suffered so far could have been avoided had the required reforms necessary to underpin economic growth been implemented.
“The CEO Initiative has spent much time over the last few months working with government and labour in developing a plan to avoid these downgrades, but little has been implemented and we saw political and policy uncertainty increase.”