Pretoria – No single event led to the downgrade to junk status; instead, rating agencies listed a number of reasons which need to be addressed, according to Small Business Development Minister Lindiwe Zulu.
Zulu spoke to Fin24 on the sidelines of a business forum held to strengthen relations between South Africa and Qatar on Wednesday. Business persons from South Africa and Qatar were in attendance, as well as Sheikh Khalifa bin Jassim Bin Mohammed Al Thani, a member of the royal family. The forum is part of a two-day state visit by the emir of Qatar.
Zulu addressed the forum and mentioned that although South Africa has been downgraded, the country would “weather the storm” as it had before 1994. “One thing I can assure you, we are ready to deal with the challenge, it is not the first time we are dealing with this challenge.”
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Zulu told Fin24 that the downgrade could not be pinned down to a single event. “At end of it all (it is) unfortunate we find ourselves in the situation, (you) can’t look at one particular incident and say this is the incident.”
However, rating agency Standard & Poor’s (S&P) downgraded South Africa’s sovereign rating to BB+ or junk following President Jacob Zuma's Cabinet reshuffle, which saw former finance minister Pravin Gordhan replaced by former home affairs minister Malusi Gigaba.
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S&P said these “executive changes” put at risk fiscal and growth outcomes. Less than a week later, rating agency Fitch followed suit, listing a potential change in economic policy direction related specifically to changes in the finance ministry among its reasons for the downgrade.
Moody’s, which has South Africa at two notches above junk status at Baa2 with a negative outlook, is yet to make a decision about the country’s rating. It placed South Africa on review for a downgrade.
Responding to a question about the way forward, Zulu said the responsibility to avoid a downgrade lies largely with government, which is currently working to ensure there is a clear path of fiscal consolidation. “We must work together collectively to make sure we stick to it.”
Zulu added that South Africans who are not optimistic that the country could regain its investment grade rating "do not have the interests of the country at heart”. She said: “As South Africans, we must be ready to do whatever we can today and in the future to avoid being downgraded.”
Zulu said the country has no choice but to convince investors that South Africa remains an attractive investment destination. She pointed out that Gordhan knew the importance of obtaining funding from foreign investors for the country, adding that he was sent by government to do so.
Zulu affirmed support for Gigaba. “The Minister of Finance in the name of ‘Malusi Gigaba’ does not work alone. He works in a collective of Cabinet … we must support each other.”
The message given to the rest of the world about the state of the country is important, Zulu said. However, the message to South Africans is more important because they should understand government has a plan to reverse the downgrade.
Zulu added that South Africa remains a strong competitor and is still capable of investing, in addition to being a recipient of investment. "Investment can never be a one-way process," she said. South Africans should not only be inward-looking but also look to opportunities outside the country and on the rest of the African continent, she added.
Zulu pointed out that a meeting chaired by Deputy President Cyril Ramaphosa at the National Economic Development and Labour Council indicated steps are already being taken to address the downgrade. The meeting was attended by social partners in labour, business and community affairs, who met with senior government officials including those of Treasury.
A high-level task team was established to address challenges.
AUDIO: Minister Lindiwe Zulu shares how South Africans can move forward following the credit downgrade
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