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IS SOUTH Africa’s economy facing yet another downgrade from the world’s top three rating agencies?
The answer to this question lies squarely in the time it will take to resolve the ongoing strike by the National Union of Metalworkers of South Africa (Numsa).
I believe the Numsa strike is also going to be protracted because it comes shortly after the end of the five-month-long platinum wage strike.
Numsa leadership and its striking workers are going to be galvanised by the fact that members of the militant Association of Mineworkers and Construction Union (Amcu) stood its ground until they were paid something that appeased them - R1 000 a month salary hike.
Earlier this week, over 220 000 steel and engineering workers belonging to Numsa embarked on a national wage strike, demanding a 12% pay hike.
Now that South Africa is having another strike to deal with, it simply means that the country is on its way to yet another possible downgrade.
The government may not take these downgrades seriously, but it must know that its attempts to borrow money in the future will be undermined by these downgrades.
Almost two years ago, prominent government people cautioned rating agencies that their warnings on South Africa’s economy were unacceptable bids by foreign “unelected capitalist” bodies telling a sovereign government what it should do.
Let us put this government ranting aside. If the Numsa strike gets to be prolonged like the platinum strike, it will deal the South African economy a further serious blow.
This is in view of the fact that the economy posted negative growth in the first quarter of this year.
Another quarter of negative growth would trigger yet another downgrade at best and a recession at worst.
Last month ratings giant Standard & Poor’s (S&P) downgraded South Africa’s sovereign credit rating by a notch to BBB-.
At the time, experts cautioned that further downgrades would continue if slow economic growth reduced tax collection and made it harder for the country to reduce debt and the budget deficit.
S&P’s rating was South Africa’s first credit rating downgrade in almost two years. This placed the country’s foreign debt rating at the lowest investment grade, just one level beyond the “junk” grade avoided by many investors.
Another rating agency, Fitch, said it would not change its BBB rating on South Africa. However, it said it would transform the outlook to negative from stable, raising the risk of a downgrade from this rating agency.
And the negative prospects for the South African economy do not end there.
This week National Treasury said it feared that some risks could undermine the government’s finances. But the worst still lies ahead in the form of the public service wage strike, it said.
Finance Minister Nhlanhla Nene said there is an urgent need to reduce industrial action in the economy.
The most concerning about this whole matter is that the country is only getting meaningless statements from the government about what it wants to do to tackle these problems.
During his State of the Nation address earlier this year, President Jacob Zuma said the economy would be at the centre of everything the government does.
But by the looks of things this has remained just that, a speech by the head of state, as nothing tangible has been communicated since then.
- Fin24
*Mzwandile Jacks is an independent journalist. Opinions expressed are his own.
The answer to this question lies squarely in the time it will take to resolve the ongoing strike by the National Union of Metalworkers of South Africa (Numsa).
I believe the Numsa strike is also going to be protracted because it comes shortly after the end of the five-month-long platinum wage strike.
Numsa leadership and its striking workers are going to be galvanised by the fact that members of the militant Association of Mineworkers and Construction Union (Amcu) stood its ground until they were paid something that appeased them - R1 000 a month salary hike.
Earlier this week, over 220 000 steel and engineering workers belonging to Numsa embarked on a national wage strike, demanding a 12% pay hike.
Now that South Africa is having another strike to deal with, it simply means that the country is on its way to yet another possible downgrade.
The government may not take these downgrades seriously, but it must know that its attempts to borrow money in the future will be undermined by these downgrades.
Almost two years ago, prominent government people cautioned rating agencies that their warnings on South Africa’s economy were unacceptable bids by foreign “unelected capitalist” bodies telling a sovereign government what it should do.
Let us put this government ranting aside. If the Numsa strike gets to be prolonged like the platinum strike, it will deal the South African economy a further serious blow.
This is in view of the fact that the economy posted negative growth in the first quarter of this year.
Another quarter of negative growth would trigger yet another downgrade at best and a recession at worst.
Last month ratings giant Standard & Poor’s (S&P) downgraded South Africa’s sovereign credit rating by a notch to BBB-.
At the time, experts cautioned that further downgrades would continue if slow economic growth reduced tax collection and made it harder for the country to reduce debt and the budget deficit.
S&P’s rating was South Africa’s first credit rating downgrade in almost two years. This placed the country’s foreign debt rating at the lowest investment grade, just one level beyond the “junk” grade avoided by many investors.
Another rating agency, Fitch, said it would not change its BBB rating on South Africa. However, it said it would transform the outlook to negative from stable, raising the risk of a downgrade from this rating agency.
And the negative prospects for the South African economy do not end there.
This week National Treasury said it feared that some risks could undermine the government’s finances. But the worst still lies ahead in the form of the public service wage strike, it said.
Finance Minister Nhlanhla Nene said there is an urgent need to reduce industrial action in the economy.
The most concerning about this whole matter is that the country is only getting meaningless statements from the government about what it wants to do to tackle these problems.
During his State of the Nation address earlier this year, President Jacob Zuma said the economy would be at the centre of everything the government does.
But by the looks of things this has remained just that, a speech by the head of state, as nothing tangible has been communicated since then.
- Fin24
*Mzwandile Jacks is an independent journalist. Opinions expressed are his own.
