Nathan added that President Cyril Ramaphosa must continue following up strong words with decisive action on rooting out corruption and restoring our state institutions. “At some stage the rating agencies are going to have to look at evidence of action and changing policies, rather than more promises that change would happen,” he said.
“At some stage patience is going to run out.”
Moody’s had widely been expected to hold SA’s sovereign credit rating at one level above junk status but there were fears it would downgrade the country’s outlook from stable to negative, thereby reversing its decision of last March, when a change of leadership in SA prompted an upgrade in the outlook.
Moody’s is the only remaining global ratings agency of the big three that has SA on an investment grade rating. The loss of this remaining foothold in the global investment pantheon would have disastrous consequences for SA, including the country’s ejection from various indexes, which would precipitate a large sale of SA assets.
The other global agencies, Fitch Ratings and Standard & Poor’s, lowered SA’s sovereign debt to below investment grade in 2017 in response to a surprise cabinet reshuffle by then president Jacob Zuma.
Nathan said action was required in four main areas this year to avoid prompting Moody’s to pull the trigger later this year. They were:
- Fiscal discipline: South Africa cannot continue to run these enormous budget deficits and continue to increase the debt burden on the country. There has to be fiscal discipline, which simply means lower government spending, more responsible spending and cutting out wasteful and corrupt expenditure.
- State-owned enterprises (SOEs): Eskom’s financial position and performance must be addressed. We have to see some progress. It is a bloated, inefficient organisation. If Eskom does not shed jobs when it is so obviously needed, this will signal government’s inability to deal with basic business issues. Obviously, job losses would be a tricky political issue so close to an election and with the already complicated relationship with unions. It is probably not palatable to really tackle the problems before the election but certainly at some stage in this year we need to take a serious look at the inefficient, bloated and unproductive SOEs that are a noose around South Africa’s neck.
- Governance: We need to see improvements throughout the government and SOEs, which means accountability and installing competent people in positions of power and, hopefully, avoiding yet more cadre deployment.
- Culpability: We need people to be held to account for all the corruption and waste that has cost the country trillions of rands over the past 10 years. If there is no culpability, we are sending a very bad message to the international community and a positive message to the people who are corrupt that there are no consequences for all of the corruption and theft, not only in government and SOEs, but also in the corporate sector.
Moody’s has two scheduled review dates a year but is under no obligation to issue a report. Analysts and journalists were kept waiting anxiously into the early hours of Saturday to hear there would be no announcement, signalling no change, effectively a reprieve.