Fin24

Unemployment threatens SA rating

2011-06-09 14:49

Johannesburg - South Africa’s high unemployment rate is a major threat to the country’s investment grade rating, said Kristin Lindow, Moody’s senior vice-president and regional credit officer for Europe and Africa, on Thursday.

Lindow was speaking at a Moody’s conference in Johannesburg.

A quarter of South Africa’s 17 million strong labour force is unemployed, leaving many stuck in poverty and raising the risk of instability.

Lindow said in an interview that the rating outlook for South Africa remains stable, with little in its present policy stance to apply downward pressure, but unemployment is a major constraint.
 
Planned secrecy laws that would make exposing corruption or dodgy government deals punishable with prison could also undermine Moody’s assessment of South Africa, said Lindow.
 
Moody’s raised South Africa’s foreign currency rating to A3 in 2009 and lowered the domestic currency rating to the same level, saying the outlook remained stable.
 
“Right now South Africa’s rating is at top of its range... so we don’t expect any further push up nor do we see pressure downwards for the moment,” Lindow told Reuters at the sidelines of a conference.
 
While South Africa, saddled with an economy struggling to grow after a recession in 2009, has seen its budget deficit swell back to around 5% after small surpluses, its finances remained healthy and economic policy sound.
 
“There’s room for that (budget deficit) to occur, although there’s a question mark as to what the plans are in the longer term and how long will this go on, and that’s something I think needs to be addressed.
 
Standard and Poor’s upgraded South Africa’s outlook to stable from negative in January, but warned increasing public debt levels could reduce budget flexibility.
 
Fitch issued a similar assessment the same month, saying South Africa’s recovery in 2010 after its first recession in nearly two decades had outpaced expectations.

But on Thursday Lindow said the high unemployment rate - especially after the economic contraction slashed about a million jobs - posed a threat.

“Unemployment and other socioeconomic factors are clearly the major constraint for South Africa’s rating going forward,” Lindow said. “It’s a constraint because it’s definitely a political issue.

"There are concerns that the economy is not generating enough jobs to absorb new entrants into the labour force, not to mention that very large pool of the unemployed.”

Another worry was a proposed new law that, if passed, would restrict access to information from official regulators and state-owned enterprises, a move critics say could deprive investors of important commercial information.

“To the extent that this leads to a reduced level of public transparency, that could have an impact on our assessment of institutional strength in South Africa,” Lindow said.
 
“The question is whether or not we see that as a signal of future trends.”

Comments
  • charles - 2011-06-09 15:22

    Why don't the writer mention that the biggest problem to unemployment and poverty in Africa and South Africa, is OVER POPULATION !!!!! As soon as this 'African culture' is broken, there will be ample jobs, food and housing for everyone.

  • I_Say - 2011-06-09 15:28

    “Right now South Africa’s rating is at top of its range... so we don’t expect any further push up nor do we see pressure downwards for the moment,” - WHo the F*** decides on these misleading headlines.. A positive article is given such negative spin. - Its because of articles like these that they want to Shut the media up...

      clark - 2011-06-09 16:23

      - A little naive I Say - what can be positive about a 25% unemployment rate ? ( I dont believe that number - more like 35%) Going forward the negatives of our economy far outweigh the positives.

      Micsin - 2011-06-09 17:38

      One word for you - idiot

  • TheUgly - 2011-06-09 15:40

    South Africa has such a poor employment rate because minimum wage is only R1,167 per month. No wonder our crime statistics are so high. You'll have to steal to survive on a salary this low. In my opinion cheap labour is the cause of the high unemployment rate. Crime will drop dramaticly if people earn decent salaries. I know many people justify the low salaries due to "a lack of skills", but this is just an excuse to take advantage of a little luxury people have access to in South Africa called cheap labour.

      scud - 2011-06-09 17:31

      Of course,the fact that our wages are higher than any of our trading partners,with our productivity lower,is not relevant?

  • I_Say - 2011-06-09 15:40

    This is actually a positive article...with a negative spin by the media...WOW...idiots

      scud - 2011-06-09 17:04

      Positive article?--its a negative article given a positive spin

      clark - 2011-06-09 17:37

      - @scud - well put.

  • Vela Stardust - 2011-06-09 15:46

    Planned secrecy laws that would make exposing corruption or dodgy government deals punishable with prison could also undermine Moody’s assessment of South Africa, said Lindow. SCARY STUFF !

  • Micsin - 2011-06-09 17:20

    People like manuel and Marcus seem to think there is sufficient growth in the economy.Slash interest rates and strong growth will flow through.the result will be improved employment, increase in fiscal collection,improved medical health,decrease in crime.come on use your iniative like global countries do!!!

  • Bemused - 2011-06-09 17:21

    If you wan to play in the world market then you have to follow the world market rules and regs. Among others there is good governance, high moral value, Openness, a free media, accountability. Is every other country out there 100% in every sphere? No I doubt it but, the majority are trying their best to cover all the requirements. Africa's problems and poverty are of it's own making and much as they like to, the blame for their poor performance can only be laid at their own door. I believe that the rest of the world should stop giving aid to Africa and leave Africa and it's peoples to their on devices. They'll sink or swim but, if they swim it'll be by their own efforts and they will be better off for having achieved by their own efforts rather than by the rest of the world's efforts.

  • Anonymous Thinker - 2011-06-09 17:49

    Looks like we're one step closer to being the next Zimbabwe...just as the ANC it seems wants it. Thieving bastards.

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