Treasury, business praised for keeping up ratings

PRESIDENT Jacob Zuma has given his backing to the work done by the Treasury and business in staving off a downgrade from rating agencies.

Zuma was in a buoyant mood yesterday after Standard & Poor’s announced that South Africa’s credit rating was kept at “negative”.

But economists warned of more dangers that lie ahead if the ANC does not sort out its politics, and the government fails to fully implement structural reforms in the economy and stabilise the labour market.

Zuma said the work done by government, business and labour had ensured that the country was not downgraded. He called for growth in the economy to enable job creation.

But economists Peter Attard Montalto of Nomura, and Dawie Roodt, chief economist at the Efficient Group, warned that this was a partial victory for the Treasury.

Roodt said South Africa now had a second chance with this latest review by S&P. He called on the government and other role players in the economy and on the political front to make use of the second opportunity.

He said a downgrade could still happen unless there were changes and he was concerned about issues raised by S&P in its latest assessment.

“For us to grow the economy we need to sort out the politics,” said Roodt.

S&P had also wanted the country to improve efficiency in StateOwned Enterprises and stability in the labour market, said Roodt.

Roodt warned that the rating agencies would not keep South Africa’s negative outlook for longer than two years, with the next review in the next six months.

He wants the government to use the time effectively in addressing the issues highlighted by agencies Fitch, Moody’s and S&P.

Higher growth was one decisive factor, and Treasury has projected a 1.5 percent economic growth next year and 2.5 percent in the following year, and Montalto said South Africa had also committed itself to fiscal consolidation.

One of the announcements made by Finance Minister Pravin Gordhan in his Medium-Term Budget Policy Statement in October was a R25 billion cut in government expenditure over the next three years.