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Gordhan hails Team SA for beating junk

Nov 27 2016 08:27
Paddy Harper

Johannesburg - Finance Minister Pravin Gordhan believes South Africa’s avoidance of “junk” status from rating agencies Moody’s and Fitch, which kept the country in the international investment grade, was a “major collective effort”.

Gordhan told City Press yesterday that Moody’s decision to leave South Africa’s long- and short-term ratings unchanged at Baa2, with a negative outlook, meant South Africa remained “investment grade”.

This, he said, was a “collective achievement by Team South Africa” and meant that the country remained attractive to investors and would not face higher lending rates when borrowing money internationally.

“This is not about the ratings themselves,” Gordhan said.

“This is about how 55 million people in this country can continue to enjoy a decent life and not be affected by high borrowing costs that will translate ultimately into higher prices for everything.”

Gordhan said the agencies had acknowledged that government was managing the fiscus “in the right kind of way”.

“Fitch emphasised again and again that government had made all the right decisions, announced in the midterm policy framework,” he said.

Gordhan said now the challenge was to balance fiscal discipline with the state’s developmental nature.

Tightening of controls in state departments and entities had begun to gain traction, while provincial headcounts and a 1% operational cost reduction across government had assisted in controlling spending.

This, along with moves to stimulate investment, should result in better business confidence.

Opposition parties, however, say the downward revision of South Africa is an indication of the impact of political instability caused by the governing ANC on the economy.

David Maynier, the DA shadow finance minister, said Moody’s decision to leave the sovereign crediting at Baa2 was “a welcome stay of execution for South Africa”.

“The review is clear: unless structural reforms are implemented to boost economic growth and stabilise national debt, a ratings downgrade is a strong possibility,” he said.

Narend Singh, the IFP finance spokesperson, said:

“As long as Finance Minister Pravin Gordhan and his team are allowed to carry on with their application of fiscal discipline and the president doesn’t make any untoward political statements, we should be out of the woods.”

In a joint statement, the CEO Initiative SA, Business Leadership SA and Business Unity SA commented that the decision to retain South Africa’s current rating, albeit with a rating outlook change, showed the agency’s focus on fiscal discipline.

This highlighted the “responsible management of the country’s budget and diligent commitment to fiscal consolidation”, which were positive factors in the agencies’ assessments of the country.

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