On Friday, Moody’s cut SA’s credit rating to sub-investment grade from BAA3 to BA1 with a negative outlook. The downgrade has come as the country grapples with recession and massive economic devastation from the lockdown called to contain the spread of the virus. The 21-day lockdown, which forms part of the national state of disaster declared by government, has seen schools and businesses shut, with South Africans told to stay home.
DA spokesperson on finance Geordin Hill-Lewis said the downgrade was caused by government’s inability to get the national debt under control and its inability to reform the electricity sector to allow for competitive generation. Our economic outlook is definitely worsened by the current coronavirus crisis, but this is not the primary cause of this downgrade,” Hill-Lewis.
He said Finance Minister Tito Mboweni has to table an emergency budget soon after the lockdown ends on April 16 as the one he previously delivered was irrelevant following the latest developments.
“This is necessary now, as none of the revenue and growth assumptions on which the February budget was based still survive. Revenue and growth projections are collapsing. The minister should see this as an opportunity to table an entirely new budget which lays the groundwork for a recovery once this crisis is over, and more importantly fundamentally changes South Africa’s economic trajectory,” he said.
In downgrading the country, Moody’s pointed at the deterioration in fiscal strength and structurally weak growth, adding these would unlikely be addressed by the current policy settings.
The agency also indicated that economic growth was likely to be weaker in terms of outlook, with the debt burden rising faster, weakening the affordability and access to funding. Hill-Lewis accused the Ramaphosa administration of pandering to the ANC’s warring factions at the expense of much-needed bold leadership.
“For as long as there is no fundamental economic policy reform to turn South Africa’s economy away from strangling state control and towards growth, there will not be any hope of regaining our investment grade rating,” he said.
Treasury, meanwhile, said Moody’s decision came at a worst time as the impact of Covid-19 was negatively affecting various sectors of the economy, including financial markets, which experienced massive sell-off in equities, bonds and exchange rates due to uncertainty of investors who retreated to safe-haven securities.
The EFF said it was not surprised by the downgrade, adding that it was due to the mismanagement of the economy through corruption and bad policies. Moody’s decision is a confirmation of what we already know because there are no believable plans to revive South Africa’s economy, to collect maximum revenue and create sustainable jobs,” the party said.
In other news – Twitter reacts to Ntsiki Mazwai’s open letter to President Ramaphosa
Following the 21 days lockdown announced by President Cyril Ramaphosa, Ntsiki Mazwai shared 3 audio on Twitter, reacting to the instruction given. The controversial poet dragged the President, believing he prioritizes money instead of the people.
Ntsiki said: “I feel like because you were never held accountable to Marikana so you didn’t learn the lesson and now you’re about to repeat the mistake on a larger scale. The fact that you broke up the company and sold it off essentially means that you ran away. Read more