ANC's loose talk has contributed to ratings downgrades - Times LIVE
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ANC's loose talk has contributed to ratings downgrades

The Editor, The Times Newspaper | 2012-03-29 00:27:26.0

The Times Editorial: Standard & Poor's yesterday became the third rating agency in four months to downgrade its outlook on South Africa to negative from stable.

The agency said it considered the easing of the country's "political pressures, and that the Treasury remains committed to further gradual fiscal consolidation" as positive.

But, it said, there were "fundamental structural economic and social problems", such as unemployment and a structural current account deficit that had not been contained.

The agency described South Africa's political landscape and the run-up to the 2014 elections as negative.

When Fitch Ratings announced in January that it had changed South Africa's outlook to negative from stable, it cited similar reasons.

In November, Moody' s cited similar argument s for the change in rating outlook. This was shortly before South Africa's five major banks were downgraded from stable to negative by Moody's.

At the time, Deputy President Kgalema Motlanthe criticised the agencies - as Finance Minister Pravin Gordhan has done - accusing them of superficial assessments.

"The decision at most reveals a broader lack of consensus on what needs to be done to resolve the current world crises. The downgrade took place in spite of overwhelming evidence that South Africa's banks avoided the global credit crisis because of regulatory mechanisms . "

Gordhan, meanwhile, has pointed to the rating agencies' own weakness - such as not pre-empting the 2008 European financial crisis.

But confidence in Africa's biggest economy is upheld not only by sound financial policies and fiscal prudence.

As has been demonstrated, ill-considered utterances such as the ANC Youth League's call for nationalisation can have negative consequences on investor confidence.

Though Gordhan is a diligent treasurer for the country, his party might not always be as diligent about maintaining discipline.


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