South Africa has dodged an economic bullet from Standard & Poor’s

03 June 2016

We welcome the decision by Standard & Poor’s Ratings Services (“Standard & Poor’s”) to affirm an investment-grade sovereign credit rating, with a negative outlook, for South Africa. The good news is South Africa has dodged an economic bullet and has not been downgraded to “junk status” by Standard & Poor’s.

However, despite this Standard & Poor’s raised serious concerns about “structural measures” which pose a risk to the investment grade credit rating, including: “rising political tension”; the lack of “cohesion of the executive branch”, and “periodic disputes between government institutions” in South Africa. 

That Standard & Poor’s did not downgrade us, feels like a miracle given President Jacob Zuma’s protracted “dirty war” against the Minister of Finance, Pravin Gordhan, and National Treasury.

What we now need is for government to get behind the Minister of Finance, Pravin Gordhan, and implement the structural reforms necessary to boost economic growth, reduce unemployment, and turn around “zombie” state-owned enterprises, like South African Airways. 

With 8.9 million people unemployed, one leading economist suggests that a sovereign ratings downgrade could trigger a recession, put 200 000 more jobs at risk, and put 600 000 more dependants at risk in South Africa.

We dare not therefore underestimate the consequences of a sovereign ratings downgrade to “junk status”: it will effect everyone and spare no one in South Africa. 

Statement issued by David Maynier MP, DA Shadow Minister of Finance, 3 June 2016