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Fri Sep 30 00:06:30 SAST 2016

We must all pull together to arrest slide into 'junk' pit

The Times Editorial | 10 March, 2016 00:32

Make no mistake: In a globalised, increasingly competitive world, a downgrade of the country's sovereign credit rating to sub-investment grade, or junk, would be a calamity.

The challenges - deep-rooted poverty and inequality, crippling unemployment, growing instability - are simply too great for our fledgling democracy to withstand the economic malaise a downgrade would herald.

The global slump in commodity prices, the frailty of the rand and the devastating drought mean that we have less income to pay for our spiralling government debt.

The experts say it takes more than seven years on average for a country to regain its investment grade rating having been "junked". Seven years without the benefits of global investment firms holding our debt because of the growing risk of a default - it just doesn't bear thinking about.

Finance Minister Pravin Gordhan knows this, as do organised business, opposition political parties and many in the ANC.

The jury is still out whether the leftists in the ruling alliance and sections of organised labour fully grasp the implications.

Consider this statement yesterday by Cosatu spokesman Sizwe Pamla, in reaction to the news that Moody's Investors Service is sending a team to South Africa next week to review the country's economic outlook: "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."

Not at all helpful - even if the trade union federation has stated its intention to interact with the Moody's team.

For some years now, Moody's has taken a more positive view on South Africa's prospects than its peers and its rating of the country presently stands at two notches above junk. We can work with them.

If ever there was a time for a united front to show we are serious about growing the economy and containing debt this is it.


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