The South African Communist Party (SACP) has described as heartless and opportunistic the decision by credit rating agency Moody’s to downgrade the country’s economy to junk status.
SACP spokesperson Alex Mashilo maintains that international rating agencies are deliberately doing this to influence the economic policy direction of the country.
The South African Federation of Trade Unions (SAFTU) says Moody’s decision comes at the worst time possible. SAFTU Secretary General Zwelinzima VaviSA says while it was expected, it is nonetheless very disappointing as it comes at a time when the country battles the coronavirus.
Warning to corrupt government
The Congress of the People (COPE) says the downgrade is once again a warning to a corrupt government. While this could have been worsened by minimal economic activities in the country, due to the nationwide lockdown following the break out of the coronavirus, Cope spokesperson Dennis Bloem says the downgrade is the reward of an unabating corruption in the country.
The DA has attributed Moody’s downgrade of South Africa’s economy to junk status to government’s inability to get our national debt under control. It has also cited government’s inability to reform the electricity sector, to allow for competitive generation as one of the contributing factors.
The party’s Shadow Minister of Finance Geordin Hill-Lewis says although the COVID-19 crisis has also worsened the country’s economic outlook, government’s refusal to implement structural reforms is to be blamed.
Some economists, on the other hand, say the downgrade will not have a significant impact on the local markets.
Chief Economist at Econometrix, Azar Jammine says this will put further strain on government debt and its spending-ability.
Jammine says the downgrade doesn’t make much of a difference as the damage has already been done.
“Therefore in the debt servicing costs in other words when government tries to borrow money to finance the difference in what it sounds and what it receives in tax revenue it will now have to pay a higher interest rate. Over the last two weeks, long term interest rates have risen by 3%, the most popular government bond the R186 that matures in 2026 has gone up from 8% to 11%, so a lot of the damage has already been done.”
Moody’s was the only rating agency that has maintained the country’s rating at an investment level. The move means that South Africa now has a junk rating from all three major international rating agencies.