Man up to fix economy, SA told
In a desperate bid to stave off a potentially devastating downgrade of South Africa's sovereign credit rating, government has reached out to the country's top economic minds for advice.
That advice: man up, accept responsibility for crippling economic development policy and take practical steps to avoid the country teetering closer to junk status.
On Monday economic experts from various sectors including labour, commerce and industry met senior Treasury officials.
The meeting, says economist Azar Jammine, was called by the Treasury to look into what could be done to address South Africa's gloomy financial outlook.
It came ahead of Finance Minister Pravin Gordhan's visit this week to the US and UK to soothe investor nerves amid fears of a credit downgrade by ratings agency Moody's.
It is the fourth meeting the government has had with industry in an attempt to address the country's economic woes.
Moody's has announced a delegation will visit South Africa next week to review the country's economic outlook pending a re-grade.
While Standard and Poor's and Fitch ratings agencies grade South Africa one notch above junk status, Moody's has the country two levels above junk.
Analysts yesterday said the government had to take the economy seriously and called for hard-hitting practical steps to show investors the country is worth investing in.
They say the government must end costly delays and gross overspending on mega construction projects such as the Medupi and Kusile power stations, which are vital to economic development.
Other steps include stopping bailouts of state-owned entities and runaway government debt and ending crippling strikes.
Moody's, in announcing its visit, predicted economic growth would drop to 0.5% this year as a "consequence of the intensification of this year's drought, low commodity prices and volatility in global and domestic markets". It is concerned about potential strikes and government debt, which has nearly doubled from 26% of GDP in 2009 to 50% last year.
"During the review Moody's will examine the likelihood of the recently announced 2016-2017 budget . being implemented as intended, and achieving the stated objective of consolidating the public finances and reversing the deterioration in fiscal strength.
"The agency will explore the implications of the expensive schemes, such as nuclear energy and the National Health Insurance. "It will assess the implications for policy of the prolonged lull in growth, persistent spending pressures and political drivers such as the local elections," a statement by the ratings agency said.
Alan Mukoki, SA Chamber of Commerce and Industry CEO, said the government must start managing properly. "It must stop massive overspending on mega industrial construction projects, deal with defunct state-owned enterprises by appointing skilled boards, and communicate properly on the country's development."
On state entities, Jammine said there must be ''improved management or restructuring''.
Political economist Daniel Silke said Moody's was questioning core aspects of government policies.
"If the government is to react to Moody's it means taking hard-nosed political decisions. Gordhan and his fellow ministers will have to present a credible argument that they are serious about tackling many of the issues worrying Moody's."
On strikes, Silke said while Moody's could express concerns about such issues, labour was unlikely to bow to pressure from the government to prevent strike action.
Cosatu spokesman Sizwe Pamla yesterday said although it planned to constructively engage with the rating agency its views had not changed. "The ratings agencies are vultures preying on developing countries. They want to coerce them into submission. The working class become victims because of high interest rates," said Pamla.
He said Cosatu was concerned about downgrading as the effects would be felt by the working class and that it would participate in meetings with Moody's delegates who would be in the country from Wednesday to Friday next week.
Desné Masie of the Wits School of Governance called for action to stamp out corruption, "which contributes to declining public finances and investor confidence.
"Gordhan has said continuing bailouts of state entities will be reviewed, which must happen. Political risks are high with continued dissatisfaction with President Jacob Zuma's presidency. South Africa needs strong leadership and commitment to policies.''
Jammine concluded: "In the end many recommendations have been made. Now it all comes down to whether there is the will to have them practically implemented."
The Treasury did not respond to queries about Monday's meeting but said it would discuss with Moody's South Africa's economic structure and performance, the government's finances, and external payments and debt. Spokesman Phumza Macanda said: "[The] government recognises that a downgrade would have negative consequences for the country and all its citizens, most especially the poor."
Reuters reports that Gordhan won applause for his London roadshow but left investors sceptical he could defend South Africa's investment grade rating - or even stay in office in light of his rift with SARS boss Tom Moyane. "I left the place thinking the minister has good intentions, hopefully he stays in his job," said Claudia Calich, head of emerging debt at M&G Investments. "But I wasn't thinking 'Wow, I should rush out and buy South Africa'.''