Former president of the Black Management Forum Bonang Mohale says government must find more innovative ways of putting the economy back on track.
Last Friday, rating agencies Moody’s and Fitch downgraded South Africa’s credit rating further into junk status.
They cited the country’s rising debt and the government’s further weakening in its fiscal position.
Standard and Poor’s Global affirmed its rating.
The downgrades will increase South Africa’s borrowing costs and will constrain its fiscal options.
Mohale says he’s concerned that the public sector wage bill is continuing to balloon.
“Now, they’ve actually out-stripped the salaries of the private sector. People who work for government earn much more on average than those in the private sector. This means we are not administering the painful medication that is needed to help the 53-million South Africans. We are pretending that we are father Christmas, that our resources are endless.”
Professor Chris Malikane, an Associate Professor at the School of Economics and Finance at Wits University further outlines what the downgrades mean:
Following the downgrade announcement, on Saturday Finance Minister Tito Mboweni said the decision by two ratings agencies, Fitch and Moody’s, to downgrade the country further into junk is a painful blow to the country as it will have immediate implications for borrowing costs and constrain government’s budget.
Announcement of downgrade:
In a statement, National Treasury said government’s policy priorities remain economic recovery and fiscal consolidation, as outlined in President Cyril Ramaphosa’s Economic Reconstruction and Recovery plan.
Recent downgrades
In March, Moody’s downgraded South Africa’s sovereign credit rating to “junk” status.
South Africa’s Finance Ministry, at the time, said the downgrade would add to prevailing financial market stress.
Moody’s said the main driver behind the downgrade was “the continuing deterioration in fiscal strength and structurally very weak growth”.
“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will exacerbate the South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses,” it added.
