Econ­o­mists be­lieve SA can turn things around

The Star Late Edition - - BUSINESS NEWS - Ndu­miso Mlilo

ECO­NOMIC com­men­ta­tors be­lieve all hope is not lost for South Africa af­ter the down­grad­ing of its for­eign cur­rency rat­ings to sub-in­vest­ment by in­ter­na­tional rat­ing agen­cies.

Stan­dard & Poor’s (S&P) low­ered the coun­try’s for­eign cur­rency rat­ings to junk sta­tus, which led to seven banks suf­fer­ing a sim­i­lar fate.

Many econ­o­mists contributed to a panel dis­cus­sion yes­ter­day, say­ing South Africa could rise from this bad sit­u­a­tion if it got its act to­gether.

Le­siba Mothata, chief econ­o­mist of In­vest­ment So­lu­tions, said the rand and bonds did not de­cline sharply af­ter the down­grade.

Coun­tries such as South Korea, Hun­gary and Thai­land have fallen into junk sta­tus and lost pol­icy di­rec­tion, which is not the case with South Africa.

He said South Korea lost the abil­ity to raise taxes with cur­rency fall­ing and the bank­ing sec­tor in cri­sis. Columbia was also in junk sta­tus with drugs and wars.

“The sit­u­a­tion looks dif­fer­ent in South Africa; the is­sues are not ex­oge­nous. We have prospects to be fallen an­gels and can turn around things if we do the right things.

“Our banks are cap­i­talised and the Trea­sury as an in­sti­tu­tion con­tin­ues with clear trans­parency and vi­sion.

“South Africa has shown an ag­ile re­sponse from the Trea­sury,” Mothata said. Mo­men­tum Azar Jam­mine, chief econ­o­mist of Econometrix, con­curred with Mothata that there was still hope for the coun­try.

He said the rand had shown re­silience, al­though it could have been around R12 against the dol­lar.

“The story is not over. What is wor­ri­some may be an op­por­tu­nity as well. If (Fi­nance Min­is­ter) Malusi Gi­gaba keeps say­ing the things he has been say­ing in the last few days, we may re­new the mo­men­tum of re­cov­ery and avoid re­ces­sion.”

One of the pos­i­tives was the con­fi­dence in busi­ness that the for­mer fi­nance min­is­ter Pravin Gord­han had in­spired.

Ra­belani Da­gada, mem­ber of the Joburg’s may­oral com­mit­tee of fi­nance, warned: “If we are down­graded fur­ther, it would be dif­fi­cult for the city to bor­row as the debt would be ex­pen­sive to ser­vice. We will be squeezed and af­fected on our quest to de­liver in­fra­struc­ture.”

Den­nis Dykes, chief econo- mist of Ned­bank, said South Africa was con­sum­ing more than it could pro­duce and had been re­ly­ing on in­vest­ment to fill the gap. There was a need for fis­cal sus­tain­abil­ity, mak­ing the ease of do­ing busi­ness bet­ter and re­duc­ing un­em­ploy­ment.

Moody’s was ex­pected to an­nounce its de­ci­sion in June, and a down­grad­ing was feared. But Dykes said even if the coun­try went into re­ces­sion, the gov­ern­ment could re­spond in a pos­i­tive way to speed up the re­cov­ery. – Xin­hua


MAK­ING THE RIGHT NOISES: Fi­nance Min­is­ter Malusi Gi­gaba.

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