NEHAWU statement on Moody’s downgrade of SA’s investment rate
27 March 2020
The National Education, Health and Allied Workers’ Union [NEHAWU] notes the decision of the western sovereign rating agency, Moody’s, on the 27th March 2020 to cut South Africa’s credit rating to Ba1 with a negative outlook.
This decision, which is the first in 25 years, takes place against the background of a mystifying austerity programme announced by the Finance Minister, Tito Mboweni, during the Budget Speech on the 26th February 2020. Accordingly, Moody’s cites the three main causes, i.e. the unreliable electricity supply, persistent weak business confidence and investment as well as the “long-standing structural labour market rigidities.”
It is unfortunate that since 2015, government has been doggedly seized with budgetary cuts to meet the policy dictates of the sovereign rating agency in which non-interest expenditure was restrained to 1.6% rather than forging a new sustainable socioeconomic development path. As a result, the economy has been strangled, lurching from one technical recession to another, amidst rising unemployment, poverty and inequalities. This has been devastating on the masses of our people, the overwhelming majority of which are black, women and youth. This tragic fiscal policy stance, which when combine with the South African Reserve Bank’s conservative monetary policy, has given our economy no chance but to plunge into a stagnation trap.
Once again, upon his announcement of further budgetary cuts during the recent Budget Speech, in which he singled out the public service workers under Public Service Coordinating Bargaining Council (PSCBC) to wrench about R160 billion from their livelihoods over the next three years, NEHAWU warned that this was a recipe of a disastrous path that would plunge our society into a downward spiral of socioeconomic crises. In the medium-term, we now face grim prospects of Mboweni’s vicious cycle of an austerity programme that would cause deep economic contraction, leading to revenue shortfalls, then further budgetary cuts that would result in further borrowing whilst the socioeconomic situation deteriorate further. These are the catastrophic results of the reversion to the crude Neoliberal toolbox since the fifth democratic dispensation.