Economists say South Africa urgently needs to resolve and change its current policy environment to avoid further downgrades.
The country is currently facing multiple crises from unemployment, unrest and low growth while government’s three growth plans disagree with each other.
A panel of economists have elaborated this at the fourth Metals and Engineering Indaba currently taking place at the IDC centre in Sandton.
They say government needs to prioritise economic growth, global competitiveness and policy uncertainty to improve the country’s Sovereign credit rating.
South Africa’s current credit rating is one notch above junk status.
This means it is becoming more difficult to borrow money and interest on loaned money is fairly high.
Executive Director at the Centre for Development and Enterprise (CDE) Ann Bernstein says she is concerned about the silence of business on recent policy debates – especially on land reform.
Bernstein believes big business has failed to make a case for key reforms needed to accelerate growth. Rating agencies have cited low growth as one of the reason for potential downgrades
She says: “You can’t just call a summit and hope that investment will arrive or jobs… no we need to deal with some tough choices. Some tough trade-offs if we are to become a competitive place in which to do business again. President Ramaphosa’s priorities should be fiscal discipline, growth friendly policy certainty, and the implementation of confident building reforms that would enable the private sector to increase economic activity, employ more people and pay more taxes. But everyone including the rating agencies and I think most citizens are waiting for change. I think the president needs to lead the country and not just the ANC.”
She says government must root out corruption and give policy certainty to reduce the chances of being further downgraded
“Fixing all of this and getting South Africa back on track requires a bold reform agenda and at its heart this is all about growth. We need a much faster growth rate which will led to more revenue and most impotently more jobs.”
Meanwhile Business Unity South Africa (Busa) CEO Tanya Cohen says they have been working had behind closed doors through a task team to engage with government and the private sector
She says: “Some of the benefits of the task team included the insistence on the integrated resource plan being published and consulted on. It included a focus on Eskom, good governance and the challenges there. It dealt with issues around corruption and certainly dealt with what the rating agencies were saying about labour relations stability. I think we all need to watch but also put pressure in terms of medium term budget policy statement that’s coming up and ensure that fiscal envelope is maintained and that the fiscus is stabilised. ”
Credit rating agencies say South Africa must sort out the low growth rate, reduce debt, clean up state owned enterprises, abide fiscal targets and start delivering on policy promises to get better credit rating scores.