Ratings agency Standard & Poor’s is set to announce its decision on South Africa’s credit rating today. With the country currently one notch above sub-investment status, and our government and politicians having lost a huge amount of credibility because for some time now it has been proven that they find it difficult to take decisions in the interest of the economy and households, we may well lose our investment grade credit rating. In a world economy that is again struggling this year, a downgrade to junks status will cause an already hurting South African household population to suffer further this year and at least in 2017.

A possible ratings downgrade, together with factors such as “Nenegate”, the impact of the current drought situation, insufficient electricity, Nkandla and the Constitution,  the upcoming municipal elections,  speculation on removing the president,  labour strikes and higher interest rates all make it clear that the South African economy is virtually on its knees. Any additional negative shock like a ratings downgrade will indeed result  to negative economic growth. Once the country is in junk status territory, it will take many years to rebuild our status to where we were, namely just below an A-rating. 

Irrespective of whether we are downgraded today or if our credit rating remains intact, what we require is efficiency and catalytic leadership. A strong, clearly articulated plan needs to be developed with buy-in from government, organised business, organised labour and civil society. Such a plan needs to be implemented, monitored and evaluated continuously with a view to get our economy back to investment grade status.

 

Issued by UASA