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Cape Town – South Africa shouldn’t take being downgraded to junk credit status lightly and should do its best to dig itself out of the hole, said Deputy President Cyril Ramaphosa on Thursday.
Responding to questions in the National Assembly, Ramaphosa said a ratings downgrade means government debt is more expensive and government should start struggling to raise debt. “We’ll see a situation where debt providers are not too enthusiastic to grant debt and they’ll ask you for an arm and a leg. This means interest payments on debt will also go up.”
In addition, the ratings downgrade will be much more of a challenge because the economy is not growing at required levels.
“But working together with the private sector, labour and communities we want to make sure it’s not a long-ended process. Therefore we should be doing things correctly – the things that have been pointed out by our debt providers.”
Ramaphosa said Finance Minister Malusi Gigaba is actively involved in trying to bring South Africa back to investment grade. “But it’s not only his problem - it’s a common one that all South Africans need to address.
“All South Africans must realise we face a real problem. Therefore we should talk positively about our country so that we can dig our way out of the hole to come back and make sure we never get into a downgraded hole once again.”
SA’s progress since 1994
Earlier in his reply, Ramaphosa named some examples to demonstrate the progress South Africa has made in the past 23 years to better the lives of its people.
“Although there are challenges at economic and political level, we have a far more stable and prosperous and relatively more equal society than for the past two decades,” he said.
South Africa’s economy, for example, is 85% bigger in real terms than in 1994. The per capita GDP is a third higher than in 1994 and 8 million more South Africans are employed than 23 years ago.
“I’m not just rattling off statistics,” Ramaphosa said, citing research by the Institute of Race Relations which confirmed the progress.
“Some people may not like that we’ve made progress. Others may feel it’s not sufficient. In fact, we all agree it’s not sufficient. We want more progress because as South Africans we expect nothing but the best and government acknowledges that.”
Ramaphosa said although the benefits of economic growth have yet to reach all people, the glass is half full and not half empty.
“We need to make it fuller. This government is determined to make sure we make progress in a variety of ways so that we can continue to build this nation.”
