Credit rating reprieve opportunity to address socio-economic challenges‚ business leaders say
Moody’s decision to leave South Africa’s credit rating unchanged at one rung above junk status has received the resounding endorsement of business‚ but with a warning that this window of opportunity should be used to urgently address the country’s socio-economic challenges.
“Whilst we welcome the decision as reflective of the progress we are making as a country in correcting some of our own goals‚ it is no reason to be complacent. This decision gives us another opportunity to roll up our sleeves and address the socio-economic challenges facing our nation‚” said Business Leadership South Africa (BLSA) CEO Bonang Mohale.
He noted that South Africa’s growth outlook had improved markedly since the beginning of the year‚ with Goldman Sachs and the Organisation for Economic Co-operation and Development (OECD) upwardly revising their growth forecast for the country.
“The unequivocal message from investors is that South Africa must deal with corruption and fix State-Owned Enterprises (SOEs). Considerable progress is being made on both fronts‚” said Mohale.
The CEO Initiative said Moody’s decision to retain the country’s investment grade rating as well as change SA’s outlook from negative to stable offered the country a window to demonstrate its ability to implement the key structural reforms necessary for improving its credit rating.
Jabu Mabuza‚ Co-convenor of the CEO Initiative‚ commented: “The decision is largely attributed to the confidence-enhancing measures taken in key areas over the past three months‚ including a smooth presidential transition‚ the appointment of a new board for Eskom‚ the presentation of a fiscally responsible Budget and changes to the national executive aimed at restoring stability to key portfolios.”
While the South African economy was still far from operating optimally‚ he said‚ the measures announced in the Budget Speech‚ along with the undertakings by the president in the State of the Nation Address‚ were clear indications of the will to achieve the necessary reforms required for inclusive and sustainable growth.
Mabuza added that South Africa should use this window of opportunity by responding appropriately to the significant challenges it faced‚ in order to improve the lives of its citizens and inspire confidence in the future of the country.
“As business‚ we remain committed to continue working with the government and labour in creating an environment that is conducive to achieving sustainable and inclusive economic growth that benefits all South Africans‚” Mabuza concluded.
The Banking Association South Africa (BASA) said all South Africans – business and consumers – would benefit from this show of confidence in the progress the country had made in addressing some of the concerns previously raised by the rating agency‚ and in its economy that was beginning to show some growth.
“Another sovereign credit rating downgrade would have inevitably been reflected in the ratings of South Africa’s banks‚ and increased the cost of borrowing for the country‚ companies and financial institutions‚ as well as making it harder to secure essential investment. In the end‚ all South Africans would have felt the burden‚” said BASA MD Cas Coovadia.
He said recognition must be given to the efforts by the National Treasury‚ labour and business leaders who worked together to persuade the rating agency – and the broader investment community – that South Africa was determined to achieve sustainable‚ inclusive economic growth.
“This ratings decision is a clear indication of what can be achieved by strong leadership‚ which is committed to acting in support of good governance.
“However‚ South Africa will only regain its investment rating from all three major credit rating agencies‚ once it achieves sustainable levels of higher economic growth and tackles its unacceptably high rates of unemployment‚ poverty and inequality‚” Coovadia cautioned.