Moody’s credit outlook downgrade caps a bad week for South Africa’s economy

2 November 2019

The decision by credit rating agency, Moody’s Investment Service, to downgrade South Africa’s rating outlook from ‘stable’ to ‘negative’, shows that Minister Tito Mboweni’s mid-term budget did not go nearly far enough in getting debt under control and reining in the budget deficit. It is another stark warning on the dangers that lie ahead if we don’t institute urgent reforms. Higher borrowing costs make it harder to invest, slowing down economic growth even more. This is a lethal combination for employment.

Friday’s decision by Moody’s makes reference to low economic growth, widening budget deficits and rising debt levels as the triple headwinds that will sink the country’s credit rating. This is precisely why the DA, in our pre-MTBS proposals presented on Monday, emphasised that government cannot afford to continue putting off difficult decisions needed to turn around the economy. We made specific, credible proposals for how to cut the public wage bill by R168 billion over three years, mainly by targeting the 29 000 millionaire managers in government head offices, without affecting the true heroes of the public service - teachers, nurses, policeman and the like.

South Africa is paying a heavy price for the policy paralysis in government. The more the government dithers and procrastinates, the more this crisis will worsen. What is needed now, as explained in the DA’s MTBPS proposals, are bold and concrete steps that will rein in the public sector wage bill, address Eskom dysfunction and stop government profligacy.

Issued by Geordin Hill-Lewis, DA Shadow Minister of Finance, 2 November 2019