Gigaba positive despite downgrade
SETBACK: NO REASON TO BE DESPONDENT – MINISTER
New finance minister says S&P had already informed him on Friday.
New Finance Minister Malusi Gigaba said in spite of the fact that a rating agency has downgraded South Africa to junk status, we have no reason to be despondent.
“It is a setback. It basically means we now have to look out for inflation, rising interest rates. Any of these things would have an impact on the ordinary South African.”
He said he was informed of Standard Poor’s (S&P) Globals’ decision to cut South African sovereign credit rating to junk status on Friday last week on his first day in office.
“When I spoke to the media on Saturday, I indicated that I had spoken to Moody’s and Fitch, but I did not mention S&P because when I walked into office on Friday, they had made their decision,” Gigaba said.
Moody’s announced on Tuesday that it has placed the country’s creditworthiness on review.
Gigaba said that S&P did not afford them the courtesy of informing them beforehand. “By Friday already when I arrived, the decision had been made. We intend talking to them going forward.”
Gigaba said he could not divulge the downgrade earlier because they had told him in confidence and he could not undermine that courtesy.
“The other two rating agencies have not adversely rated us. Moody’s have put us on review, Fitch has to take a decision and we engage with them.
“To that extent, let us not downplay the significance of the decision by S&P. The South African economy is strong, our institutions are strong and clearly the macroeconomic fundamentals are also strong,” he said. He said the concerns are about political reasons, policy uncertainties, those are going to be managed. “It is not easy to get out of a rating downgrade, but I think we can manage the political and policy reasons. I remain confident.
“The corporate governance in our state owned companies is a matter of top priority,” he said.
“On sustaining the fiscal framework as approved in the budget, things have not changed,” he said.
The South African economy is strong.