DA and EFF say country was on the way to junk status
OPPOSITION parties have cautioned the ANC-led government against using the coronavirus as the reason behind the country’s downgrading to junk status by credit rating company Moody’s.
On Friday, Moody’s cut SA’s credit rating to sub-investment grade from BAA3 to BA1 with a negative outlook.
The downgrade comes as the country grapples with recession and massive economic devastation following President Cyril Ramaphosa’s announcement of a lockdown in a bid to contain the sporadic spread of the virus.
The 21-day lockdown, which forms part of the national state of disaster declared by government, has seen all schools and some businesses shut down with South Africans being urged to stay home.
DA spokesperson on finance Geordin Hill-Lewis said the downgrade was caused by government’s inability to get the national debt under control and its inability to reform the electricity sector in order to allow for competitive generation.
“Our economic outlook is definitely worsened by the current coronavirus crisis, but this is not the primary cause of this downgrade,” said Hill-Lewis.
He added that Finance Minister Tito Mboweni has to table an emergency budget soon after the lockdown ends on April 16 as the one he previously delivered was irrelevant following the latest developments in the country’s ailing economy.
“This is necessary now, as none of the revenue and growth assumptions on which the February budget was based still survive. Revenue and growth projections are collapsing. The minister should see this as an opportunity to table an entirely new budget which lays the groundwork for a recovery once this crisis is over, and more importantly, fundamentally changes South Africa’s economic trajectory,” he said.
In its downgrading of SA, Moody’s pointed at the deterioration in fiscal strength and structurally weak growth, adding these would unlikely be addressed by the current policy settings set down by government.
The credit rating agency also indicated that economic growth was likely to be weaker in terms of outlook, with the debt burden rising faster, weakening the affordability and access to funding.
Hill-Lewis accused Ramaphosa’s administration of pandering to the ANC’s warring factions at the expense of much needed bold leadership.
“For as long as there is no fundamental economic policy reform to turn South Africa’s economy away from strangling state control and towards growth, there will not be any hope of regaining our investment grade rating,” he said.
Treasury meanwhile said Moody’s decision came at the worst time as the impact of Covid-19 was negatively affecting various sectors of the economy, including financial markets, which experienced massive sell-off in equities, bonds and exchange rates due to uncertainty of investors who retreated to safe haven securities.
The EFF on the other hand said it was not surprised by the downgrade, adding that it was due to the mismanagement of the economy through corruption and bad policies.
“Moody’s decision is a confirmation of what we already know because there are no believable plans to revive SA’s economy, to collect maximum revenue and create sustainable jobs,” the EFF said.