Last month’s decision by credit ratings agency S&P to affirm South Africa’s long-term foreign and local currency debt, and leave them one and two notches below investment grade respectively, might be disappointing. But is also an opportunity for South Africans to start difficult conversations that cannot be deferred.
Of course, it would have been preferable for S&P to raise the outlook from stable to positive, given the developments of the past three months of President Cyril Rampahosa’s tenure, but they were clearly not sufficiently moved.
Nonetheless, it would be churlish to underestimate the achievements of the last three months. Our country hasn’t experienced such sustained positive sentiment, hope and confidence in a long time. As a result of the rise in confidence and commitment, several reputable agencies – including Goldman Sachs, the Organisation for Economic Co-operation and Development and Harvard University – have upwardly revised our short to medium-term GDP growth forecasts.
In the last three months:
- Ten compromised ministers have lost their jobs;
- Our major state-owned enterprises (SOEs), including Eskom and Transnet, have new boards appointed by state ministers, not unelected civilians;
- Most of the SOE executives implicated in the state capture project have been fired or are undergoing disciplinary hearings and, at the SABC, for example, arrests have been made;
- The Zondo Commission of Inquiry into state capture has commenced its investigations;
- Not only is the SARS Commissioner facing disciplinary action, a judicial commission of inquiry has been established to investigate governance and tax administration concerns, as part of the process of restoring confidence in the tax-collector;
- The architects of state capture are holed up outside the country fearing arrest; and
- The new administration has prioritised the economy and placed inclusive growth and transformation at the centre of the economic agenda.
During these past few months, business has begun implementing the commitments it made as part of its contract with South Africa. Our members and other companies have launched the youth employment services (YES) programme – an initiative to put as many as three million youths in paid internships over the next three years. This imaginative programme, launched by Ramaphosa in March, is also open to non-BLSA members, as resolving youth unemployment deserves everyone’s participation.
Our members have offered to put resources – including skills and money – behind their commitment to assisting government in optimally structuring its SOE portfolio. Apart from seconding skilled personnel to serve as executives and directors of boards of SOEs, our financial services members are also willing to consider restructuring their loans to some of these troubled SOEs.
In the week when BLSA lifted Eskom’s suspension, in recognition of the progress made in restoring good governance and stamping out malfeasance, it was heartening to learn that Eskom had raised R13 billion, 10% ahead of the target for this financial year – aimed at reducing its funding gap to R58 billion.
Last week, Parliament passed a set of transformative labour laws that, if implemented, will contribute to industrial relations stability. These include the historic introduction of the national minimum wage, which is expected to positively impact the lives of more than six million of the lowest-earning South Africans.
One of the difficult but necessary conversations currently underway is the proposed Constitutional review to allow for expropriation of land without compensation – beyond the scope envisaged in Section 25 of our Constitution. As business, we understand why this issue resonates with many South Africans. We think it is appropriate that this emotive subject has been removed from the realm of populism, and is being conducted through a structured, lawful and participatory Parliamentary process. Deferring it indefinitely would be reckless.
S&P has raised concerns about our country’s rising debt levels, which need to spark a conversation about the trajectory of our domestic currency denominated debt, whilst containing the foreign currency denominated debt.
Trimming the fat
While we are only in the first quarter of the new financial year, it’s important that government implements all the commitments, especially the structural reforms, contained in the February 2018 budget.
The conversation within government to trim the size of Cabinet, and the reduction in the number of ministers and deputy ministers’ support staff, is a necessary and correct one, but it is the tip of the iceberg. It serves to merely set an example.
In the long term, South Africa has to grapple with the size and configuration of the public service and decide how to train more teachers, nurses and policemen – and how to pay them better, all while containing the wage bill.
Finally, let us bear in mind that getting out of junk takes a number of years, and only a few countries, including South Korea, have done so in a relatively shorter period. South Africa can and will improve its credit rating, and business is here for the long haul.
* Bonang Mohale is the CEO of Business Leadership South Africa. Views expressed are his own.
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