A credit downgrade will hit everyone in SA – Jonas

Johannesburg – Preserving the investment grade credit rating is not just important for “white capitalists” but it is equally important for the poor and middle class, said Deputy Finance Minister Mcebisi Jonas.

Jonas was speaking at the Association of Black Securities and Investment Professionals (Absip) Financial Services Conference, held in Sandton on Tuesday.  He highlighted the importance of protecting South Africa’s credit rating in his address about inclusive economic growth and transformation.

“With a downgrade the cost of borrowing would triple and would have implications on social spending and programmes,” said Jonas.

Sharing his sentiments, ANC official and former economic development minister Enoch Godongwana said that he was afraid of the uncertainty that would come with a credit downgrade. “I do not know what it means and I do not want to deal with the unknown … I am scared of a downgrade.”

“The stories we hear about other countries are terrible. I don’t want to live in another country, I don’t want a second passport,” he quipped.

READ: SA needs a 'less corrupt' government to boost growth - Jonas

Godongwana explained that leaders of the CEO Initiative had relayed their concerns about the downgrade in a meeting with government officials.

Among these was the electricity crisis, which has been resolved in recent months. “But with one stroke of a pen, Brian [Molefe] has just written that off when he cut renewables out of it,” said Godongwana.  He said that the matter is currently being attended to and “won’t be a problem”.

Another issue is labour market reforms. “Much progress has been made even though little is known by the public,” he said. “The deputy president is leading a process dealing with this matter.” The process was introduced following the platinum strike and it addresses its length and violent nature, explained Godongwana.

“The reason we can’t effect these changes in legislation is because we are waiting for the conclusion of the minimum wage debate,” he said.

Thirdly, the amendment of the Mineral and Petroleum Resources Development Act (MPRDA), happening in the mining sector, is another concern. Godongwana said that progress had been made in this matter in parliament, last week.

Lastly, the disruption in the executive arm of government is another issue. “Things have gone worse since ratings agencies made that point.” As for the integrity of institutions, Godongwana said that what has happened with Finance Minister Pravin Gordhan, does not only impact the minister. It also impacts the institutional integrity of Treasury and the independence of the South African Reserve Bank (Sarb). “These are key things and institutions that should be protected,” he added.

“If Pravin presents a fiscal framework, everyone must have confidence in framework…  If the fiscal framework is a horse, then we need a jockey capable to drive that framework,” he said.