Business Unity SA head Sipho Pityana has urged South African President Cyril Ramaphosa to “rise to the occasion” following the decision by ratings agency Moody’s to downgrade South Africa’s outlook from stable to negative.
Although it was widely expected, the confirmation on Friday night raised fears that Moody’s would become the last of the big three agencies to downgrade South Africa to “junk” status, which would make it impossible for the country to borrow on capital markets, therefore plunging it deeper into economic catastrophe, the Johannesburg-based City Press reported.
Moody’s, which has been the friendliest of the agencies towards South Africa, said the country was on a debt-trap trajectory. It said the government’s ability to implement economic reform initiatives that would “durably lift growth” was facing “obstacles in part from outstanding vested interests.”
South Africa’s trade unions, including the governing party’s alliance partner Cosatu, have been the most vocal in opposing the government’s reform plans.
Moody’s said it would wait for next year’s budget speech in February to see “whether or not the government is committed to fiscal consolidation.”
In a hard-hitting statement, Pityana said South Africa was now faced with the danger of having to seek a bailout from the International Monetary Fund — a situation that would come with punishing austerity measures which would have “drastic consequences on our nation.”
“Moody’s has rightly pointed out that government has to get its house in order, and if it doesn’t, our investment rating will be cut to junk,” Pityana said. “And we all know what that means: Our economy will slide even further, we will no longer be able to borrow ourselves out of debt and the entire economic system will start to unravel.”
He added that Ramaphosa’s government had between now and the budget speech in February to “show clear leadership” in order to avoid that catastrophe.
“This is the biggest priority he faces now and he will have to rise to the occasion,” said Pityana, noting that there was now an urgent need to make tough decisions and implement reforms.
“We need to cut through the grandstanding and posturing, make the necessary compromises and deal with these issues once and for all. Otherwise, we may not have an economy to talk about,” Pityana said.
Finance Minister Tito Mboweni reacted to the downgrade announcement by calling on South Africans to “roll up our sleeves and do what we have to do.”
Admitting that he had received the news with a “heavy heart,” Mboweni said it was a case of “now or never.”
“We need all hands on deck,” Mboweni said. “Government, labor, business and civil society, we need each other more than ever before. This country is ours and it is only us who can turn it around.”
In a statement after the announcement by Moody’s, Treasury sought to assure the public that it was acting to stabilize the economy, including sorting out the mess at Eskom, the main drag on South Africa’s economy.
“The National Treasury and the department of public enterprises are instituting a series of measures to bring discipline to the utility’s finances, encourage Eskom to run their power stations better, improve operational efficiencies and to step up the timelines for restructuring the business into three entities to facilitate transparency, cost efficiencies, optimal investment in infrastructure and improved operational efficiencies,” the Treasury said.