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Panic in South Africa over potential ratings downgrade


Outcome may lead to further political fights

pravin gordhan 21

By Lukmon Akintola


Palpable panic is in the air in South Africa at the moment even as researchers from the world’s major ratings agencies, namely S&P, Moody’s and Fitch are in the country.

Sources say their mission in the country is to critically enquire whether the South African Government, through thePravin ordhan led Treasury Department can keep a lid on state spending; as well as implement long-overdue reforms to spark life into the stagnant economy.

Evidently, the answers they receive will determine whether the country’s credit rating drops to junk status, which will indeed be further fuel for a fresh round of negatives in a nation that has lately seen a lot of trouble.

It will be recalled that during the commodities boom and the subsequent reaction to the Global Finance Crisis, the former aparthed enclave had been able to avoid being negatively rated though the consensus was that its economy was out of step with the world like several others that had received the short end of the stick then. But it is not looking very likely that the country will get a ‘sentimental reprieve’ this time around.

Biznews editor, Alec Hogg explains why:

‘That luxury is no longer available. Pretty much everywhere nowadays, policy makers are supporting business, promoting entrepreneurship, hacking at bureaucracy and the public sector’s share of the economy. The Zuma Administration is doing exactly the opposite.’

Acording to The Free Market Foundation, the Zuma administration has alreadyprepared a White Paper which proposes a new State Owned Enterprise to effect control over the ICT sector. The concern is that the coming into being of yet another SOE at this time beggars belief so soon after news emerged that the existing ones agreed irregular spending of R46 billion last year.

There is also concern as to the political dimensions of the decision in the days ahead given the frosty relationship between President Jacob Zuma and Finance Minister and Treasury Chief, Pravin Gordhan.


South Africa’s Minister of Finance, Pravin Gordhan


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