Downgrade: Our people will be worse off - CEOs

Johannesburg – The credit downgrade to junk status by ratings agency Standard & Poor’s (S&P) could have been avoided, said the CEO Initiative.

Following South Africa’s downgrade from BBB- to BB+ on Monday, the CEO Initiative issued a statement expressing their disappointment, especially given that a number of “green shoots” had been appearing in the economy. This is due to the work done to restore confidence among investors and ratings agencies, through the collaboration between business, government and labour.

READ: S&P downgrades SA to junk status

“This downgrade could and should have been avoided had the structural reforms necessary to underpin sustained and inclusive economic growth been implemented in the interests of all South Africans,” said the CEO Initiative.

Following his axing, former finance minister Pravin Gordhan told journalists at a briefing on Friday that there were positives in the South African economy. He added that there was a strong case to keep South Africa investment grade.

ALSO READ: SA has strong case to remain investment grade – Gordhan

The CEO Initiative explained that the downgrade would impact interest rates, increasing the cost of borrowing. It will further reduce investor confidence. “When investors lose faith and trust in our economy, all citizens pay the price for this in the form of higher inflation, higher borrowing costs and decreased buying power as well as large reductions in the values of their savings, pensions and investments.”

The CEO Initiative added that this will also negatively impact inclusive growth. “Populist policies that focus on short-term solutions with no regard for the liabilities that we bestow on future generations will only result in the economy slipping further away from providing opportunities that benefit all that live in the country.”

“No good comes from a downgrade. Now that this has happened, what is important is how we react,” said the CEOs. This involves having leadership dedicated to creating an environment for policies that support inclusive economic growth. “Without this our country will not fulfil its democratic potential and all our people will be worse off.”