The ANC’s allies had some harsh words for sovereign rating agency Moody’s decision to downgrade South Africa’s investment rating to junk status, with the SA Communist Party describing the move as “heartless, insensitive and inconsiderate” in the light of the coronavirus crisis that has brought the country to a standstill.
But some opposition parties blamed the ANC’s track record of corruption, the escalating public spending and the national debt. They put the blame for the decision squarely on burdensome state-owned enterprises.
SACP spokesperson Alex Mashilo said the decision was made in the midst of a global health emergency, national disaster, and a nationwide lockdown in South Africa resulting from the coronavirus crisis.
He said a number of economic sectors wouldn’t be running during this period and South Africa was not alone in this. Other countries also faced the same emergency situations.
“It is clear that certain global rating agencies and other forces want to usurp the economic policy formulation from democratically elected governments, such as ours in South Africa, and impose a foreign monopoly finance capital-driven agenda, opposed to the interests and aspirations of the people, especially the workers and the poor,” Mashilo said.
He said the party was opposed to the agenda of “weaponising” the rating agencies and other attempts of exploiting the global emergency to undermine South African sovereignty or “impose private profiteering agendas”.
Congress of SA Trade Unions (Cosatu) spokesperson Sizwe Pamla said the below-investment grade rating was not surprising because SA’s economy has been stagnant for some time and nothing had been done to fix it.
“Clearly, this is going to have a painful effect on the economy because it will squeeze our already scarce public funds. It will also likely deter international investments, in particular pension funds,” Pamla said.
“We need a serious recovery package to fix this and kick-start the economy. The country needs to focus on employment creation by making funds available for clean energy, technology, and infrastructure projects.”
Pamla suggested a three-month payment holiday for all loans, which would represent the largest stimulus package injected into the economy.
“The Reserve Bank needs to cut interest rates by a further 100 basis points in April. The UIF needs to ramp up its capacity to roll out relief to workers now on unpaid leave,” he said.
Debt counselling firm Debt Rescue CEO Neil Roets said the substantial drop in the fuel price of about R2 a litre in April should be seen as a short-term reprieve and the investment grade to junk would hit consumers hard.
Roets warned consumers against further hoarding. “There is absolutely no reason to believe there will be shortages of food in the near future. We have seen widespread evidence of consumers buying bulk food on credit and store cards – both of which carry high interest rates.”
Dawie Roodt, chief economist of the Efficient Group, said he expected a “deep” recession bottoming out at a negative rate of around 3% and 5%.
Freedom Front Plus chief of finance Wouter Wessels said Moody’s downgrading of SA could not have come at a worse time, but it was to be expected due to the ANC government’s mismanagement of the fiscus and the lack of fiscal discipline underlying its destructive economic policy.
“The government allowed public enterprises to be driven to the very verge of bankruptcy by corruption, mismanagement and looting, especially in the time of state capture. That was the main reason for Moody’s decision.”
Wessels said a new budget would have to be tabled as soon as possible after the lockdown. “It is, therefore, absolutely imperative to make drastic changes to improve fiscal policy and discipline. Structural reform is crucial for the transformation of public enterprises so that they are no longer a burden for the state.”
According to National Freedom Party secretary-general Canaan Mdletshe, Moody’s decision “adds salt into an already bleeding wound of South African pockets”.
“This would hit the poorest of the poor hard. We were hopeful that Moody’s would spare the country a lifeline.”
Congress of the People said the downgrading was a serious blow. Spokesperson Dennis Bloem said it warned the ANC corruption would have devastating consequences on its economy. “This will hit all of us very hard, especially the unemployed.”