Today’s announcements by S&P to downgrade their local currency rating, and Moody’s to place the country on ‘downgrade review’ represent a fresh setback for South Africa. It will deliver yet another blow to an already weakened economy and negatively impact the everyday lives of millions of South Africans. Business and investor confidence in South Africa is already at a 30-year low and this will only deepen it.
Events such as the two cabinet reshuffles, mixed messages around nuclear capability, poor numbers and a lack of direction in the Medium-Term Budget Policy statement and most recently the resignation of Michael Sachs at National Treasury, have all sent a message of instability and lack of clarity to the ratings agencies.
The downgrade announced today as well as the downgrades earlier this year reflect the declining confidence in the management of our economy, the quality of our institutions, and the choices we are making as a society. Deficiencies in these areas are making the possibility of a prosperous South Africa less and less plausible and the lives of South Africans are getting more and more expensive.
The situation we are in was avoidable. Instead of pursuing stability and certainty in fiscal policy and regulatory reform, the government has become riddled with the twin cancers of corruption and state capture and put the economy of South Africa in jeopardy.
Business believes in South Africa, and BLSA is committed to providing solutions to this crisis that is impacting millions of ordinary South Africans. BLSA commits to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
Our Contract with South Africa sets out how Business will encourage and promote inclusive economic growth and transformation. We have also set out the conditions and roadmap by which the government can reverse the fortunes of millions of South Africans. This should include but is not limited to;
- The eradication of state capture. BLSA repeats its call for an independent judicial enquiry to be established as recommended in the public protector report “A State of Capture”.
- Addressing the broader economic crisis by enforcing strict fiscal discipline. This means that government must commit to not adding big new spending programmes to existing budget plans. For example, there should be no nuclear build.
- Addressing the leadership, governance and balance sheets of critical state-owned enterprises. This is particularly important to speed up the release of government from SOE guarantees, and therefore creating the much-needed fiscal space for spending on more pressing needs in society.
- Reviewing the national budget and making the necessary adjustments. But it is vital that cuts are not imposed on key national institutions and social support systems such as grants, housing and the EPWP.
- Prioritising inclusive economic growth and job creation above all else for the sake of all South Africans. Government must commit to working with business and other sectors of society to develop an urgent economic recovery plan.
Bonang Mohale, BLSA CEO said: “This administration seems to derive joy at scoring own goals. BLSA has long stated that many economic and political problems South Africans experience are rooted in corruption, state capture and political patronage resulting in a trust deficit. Unfortunately, it’s the ordinary man and woman who continue to feel the impact the most with the lack of jobs, ever-increasing prices of goods and denial of basic services.”
Mohale continued: “Corruption and state capture continue to deny ordinary South Africans basic human rights; basic quality education, health care, housing and job opportunities. Until our state institutions are truly independent, especially the police services and NPA to bring to book those who are implicated in state capture, confidence will remain low. Until there is an unambiguous declaration of abandoning the nuclear programme and setting aside of mining charter 3, the trust deficit will persist. BLSA calls upon the government to engage organised business, organised labour and civil society to urgently work on an emergency economic recovery plan to rescue our economy from the fiscal cliff. Business Believes in South Africa. We did not inherit this country from our ancestors but borrowed it from our grandchildren.”
BLSA believes South Africa needs a clear path to a modernised, inclusive and growing economy. BLSA is working with other sectors of society to map out this path and to ensure we address poverty, inequality and unemployment.