Basa warns ef­fects of junk sta­tus will be felt

The Star Early Edition - - OPINION & ANALYSIS - ANA

SOUTH Africa has not yet ex­pe­ri­enced the full im­pact of the down­grades to “junk” sta­tus by rat­ings agen­cies S&P’s Global and Fitch, mainly be­cause of US dol­lar weak­ness and other global con­di­tions, the Bank­ing As­so­ci­a­tion South Africa (Basa) said on Satur­day.

Nev­er­the­less, Basa wel­comed the de­ci­sion by rat­ings agency Moody’s on Fri­day to keep South Africa’s sov­er­eign rat­ings above sub-in­vest­ment grade.

“This is good news in the midst of the re­cent news of our econ­omy be­ing tech­ni­cally in re­ces­sion. How­ever, we must not be lulled into a sense of com­pla­cency that de­tracts from ad­dress­ing the crit­i­cal is­sues that led to down­grades to ‘junk’ sta­tus (by S&P’s Global and Fitch). We also warn that Moody’s has SA on a neg­a­tive out­look,” Basa MD Cas Coova­dia said.

“We have not yet ex­pe­ri­enced the full im­pact of the down­grades by S&P’s and Fitch pri­mar­ily be­cause of dol­lar weak­ness and other global con­di­tions. Also, SA’s im­proved agri­cul­tural out­put has helped re­duce in­fla­tion, which has helped keep in­ter­est rates steady. The South African econ­omy, how­ever, has sunk into re­ces­sion.

“The medium to long-term im­pacts of th­ese down­grades will be sig­nif­i­cant and will put ad­di­tional pres­sures on an al­ready weak econ­omy. We thus need a sense of ur­gency from the gov­ern­ment to ad­dress crit­i­cal block­ages, most of which are in the gov­ern­ment’s do­main,” he said.

The fail­ure by the gov­ern­ment to deal with con­cerns re­lat­ing to cer­tainty around key eco­nomic pol­icy ar­eas, sig­nif­i­cant on­go­ing un­easi­ness around lead­er­ship, and an out­right fail­ure to suc­cess­fully im­ple­ment ef­forts that grow the econ­omy or cre­ate jobs all pointed to a bleak fu­ture.

Un­em­ploy­ment was at its high­est lev­els in over a decade and real gross do­mes­tic prod­uct had be­gun to con­tract. Both fac­tors pointed to the im­pact of th­ese ear­lier rat­ings down­grades and reaf­firmed the very real so­cial and eco­nomic shock that was al­ready af­fect­ing all South Africans.

“In the ab­sence of clear po­lit­i­cal lead­er­ship and pol­icy cer­tainty, Basa re­mains con­vinced that it is in­cum­bent for busi­ness, labour, and civil so­ci­ety to work jointly in the na­tional in­ter­est of our coun­try,” Coova­dia said.

Moody’s on Fri­day de­cided to keep South Africa’s sov­er­eign rat­ings above sub-in­vest­ment grade.

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