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.