The ratings agencies are not the cure-all remedy for all our economic problems
6 December 2016
The Congress of South African Trade Unions totally rejects the outcomes of the rating agencies assessment of the creditworthiness of SA’s sovereign debt. The federation believes that SA’s political and economic affairs are in order and deserve the highest rating and not the investment grade rating with a negative outlook.
We warn the South African government not to forget about the voters and pander to these ratings agencies. The talk about structural reforms that they have promised to the crediting rating agencies ,as a way of mitigating risks to the country’s credit rating are a clear indication of a government that is now beholden to ratings agencies instead of the citizens.
SA does not deserve the negative ratings because SA’s budget deficit only constitutes 3.4% of GDP.In 2015/16 South African government’s net loan debt was R1 804.6 or 44.2% of the GDP. In 2015/16 the debt-service costs amounted to R128, 8 billion or 3.2% of GDP. Total debt-service costs as percentage of expenditure amounted to 10.4% and as percentage of revenue amounted to 12, 0%.
We feel that these rating agencies are here to re-colonise South Africa. Keeping SA’s investment grade status with a negative outlook increases the risk of a downgrade to junk status. Whilst the rating agencies seem to be engaging in a neutral exercise of analysing the risks in the debtor, and in ensuring that good governance is rewarded through lower borrowing costs, they are clearly biased towards SA.
Their annual reviews are an attempt to coerce the ANC led government into abandoning the NDR, under the guise of the urgent need to assure and improve the confidence of investors in the SA economy.
While, we acknowledge our problems as a country, we refuse to allow these ratings agencies to be given power over our country. SA has a Constitution which is based on the rule of law in which contracts are enforceable by an independent judiciary.
South Africa’s Constitutional Parliamentary Democracy offers political stability to both the domestic public and investors, as well as to foreign visitors and investors. Some of the allegations surrounding the use of state institutions should be decided in different forums, including commissions of inquiry or by our courts.
The political atmosphere in the country is conducive and friendly to a wider community of investors and we reject the scaremongering about threats of political instability, or signals of economic turmoil or the issue of policy uncertainties. South African socio-economic problems will be resolved through social dialogue among different stakeholders. We call on government, National Treasury in particular not to rely on these reports blindly but to do their own objective assessments before handing over everything to these agencies
Issued by Sizwe Pamla, National Spokesperson, 6 December 2016