Chris Hart opens up on junk status, IMF bailout and press freedom

13 May 2016

Cape Town - South Africa will most likely have reached junk status by the end of this year, according to Chris Hart, former Standard Bank economic commentator.

Hart, who resigned in March from his position as investment strategist at the bank’s wealth and investment division amid a Twitter furore, spoke at a Cape Town Press Club lunch on Thursday about the current economic and political climate as well as what he perceives as censorship on freedom of speech in South Africa.

The fact that Moody’s rating agency has retained its credit rating outlook of South Africa at two notches above junk status is not a sign that other rating agencies, such as Fitch and Standard & Poor’s, would refrain from downgrading the country to junk status, Hart said.

“With Moody’s it was more a case of ‘the glass is half full, not half empty'. Moody’s had a wait-and-see stance, but Fitch and S&P may take a different view (when the rating agencies consider South Africa’s credit rating in June).”

Hart spoke about South Africa’s watershed moments – the first of which was a peaceful transition to democracy under the late president Nelson Mandela. For him, the second watershed event when was President Jacob Zuma was elected as ANC leader in Polokwane in 2007 and the corruption charges against him were dropped. “This compromised the institutions that used to give South Africa its strength.”

According to Hart, there is currently a landscape of policy failure and politics of distraction under the ANC-led government. “Race is that distraction. But it’s not so much about race for the ANC than control. ‘Transformation’ has become a watchword for control."

Hart said South Africa has a budget shortfall because there’s no economic growth. “And how do you bring new economic activity in existence? You have to have investment. And what resources do you use to invest? The answer is you have to consume less than what you produce. But we don’t teach people that.”

An IMF bailout?

He is also of the view that South Africa’s decline to junk status is only a “milestone” and the next step would be to ask the International Monetary Fund (IMF) for a bailout.

“But the IMF is the nastiest, most spiteful organisation on earth. They’ll lend you money on the condition that you stop doing the things that landed you in trouble. And these are the things government is doing to get more votes and now they can’t do it any more.”

Hart added that in two-and-a-half years’ time the rand could trade at R60 against the US dollar. “It will be significantly weaker from the current level. We’re not immune against that. The current economic thinking is taking us down this route.”

Censorship and freedom of speech

From a socioeconomic point of view, Hart said South Africans’ freedom of speech is infringed upon. “And the media is complicit. Maybe we need a media tribunal and we’ll start appreciating what media freedom is.”

With reference to the tweet that landed him in trouble in January this year, Hart bemoaned the fact that South Africans aren’t defending their fellow citizens’ right to say whatever they want to say. “Nobody has the monopoly on rights. There is no fighting against the current insidious censorship. Freedom of speech has to be more important than being offended," he said.

Hart was suspended early this year after a tweet that said: "More than 25 years after apartheid ended, the victims are increasing along with a sense of entitlement and hatred towards minorities.”

Standard Bank immediately distanced itself from his tweet, adding that the bank did not endorse the comments made.

This article first appeared on Fin24, see here.