Averting junk status is very urgent

21 April 2016

Congress of the People agrees with those commentators who believe that the rating agencies will most likely downgrade South African sovereign bonds. If that happens, the ANC must take all of the blame. That is because the ANC has it in its power to keep South Africa from falling into junk status.

Moody’s, Standard & Poor’s (S&P) and Fitch have South Africa under review. If South Africa is downgraded the cost of borrowing will escalate, inflation will rise, economic growth will be hampered even further and government will collect less tax. This will push the government to borrow more at a higher cost and that will negatively impact on infrastructure spend and on social projects. While our country is on the very brink of falling off the list of investment worthy countries, the ANC can do following  five things to save the situation -

1. recall Zuma with immediate effect;

2. replace the Speaker with someone more credible, capable and impartial;

3. slash the size of the cabinet by 60%;

4. double the Public Protector’s budget; and

5. cut red tape and expand opportunities for generating renewable energy.

Of the Brics countries, Brazil and Russia have already been downgraded to junk status. If South Africa goes the same route, our economic woes will multiply, social unrest will heighten to dangerous levels, government functioning and service delivery will be affected and we will be forced as a nation to go to IMF, cap in hand, for a bail out. Rather than be compelled to undertake structural reform by an outside agency, the ANC should do what is necessary in the remaining weeks and days that are available to avert the downgrade. It is not doing quarter as much as it should.

Congress of the People urges South Africans to study what happened in Argentina, Colombia, Romania, South Korea and more recently what is happening in Greece, Russia and Brazil to understand what is in store for our nation if South Africa falls into junk status. We face a situation that is dire. The Minister of Finance is doing his best but he needs us as the citizenry to keep his path clear and his authority in the ministry unchallenged. Let us be vocal and demand the changes that are necessary before it is too late.

Issued by Dennis Bloem, COPE Spokesperson, 21 April 2016