SA's agriculture, food security threatened by downgrade

Cape Town - South Africa's ratings downgrade by S&P will adversely affect agricultural production in the country and potentially food security, Omri van Zyl, executive director of Agri SA said on Tuesday.

S&P Global Ratings cut SA’s debt to junk on Monday evening and Moody’s Investors Service has placed it on review for a downgrade. S&P explained that the downgrade is a consequence of the Cabinet reshuffle shortly after midnight on Friday. Agri SA pointed out that over a period of 19 years, S&P had downgraded 23 countries to junk status. Of those, only six recovered, with the shortest recovery time being 5 years.  

“Recovering from a downgrade takes considerable effort from both the political and economic sectors of society. The president now needs to explain what he is going to do to get SA out of the junk status. If the president cannot explain his actions, he must step down,” said Agri SA president Johannes Möller.  

Independent agricultural economist Fanie Brink told Fin24 the downgrade, which has been expected for some time, will force SA into negative economic growth with much higher unemployment, poverty and the general degeneration of the livelihoods and prosperity for all South Africans.

READ: What S&P downgrade means for SA

In his view, the consequences of the downgrade will be even worse "as long as the government is trying to stay in power through its social legislation, while it deliberately ignores the basic economic laws and principles which is the only way to solve the many serious problems facing the country".

Brink said economic growth is the only way these problems can be addressed.

"Economic growth is created by profits and nothing else and profits are driven by two main drivers. Firstly, it is driven by the prices of all the inputs which are used in all the industries and sectors in the economy against the prices of all the outputs that are produced, manufactured and delivered. Secondly, it is created by the efficiency of the technology with which these inputs are converted into products and services," said Brink.

"The downgrade will undoubtedly harm the economy and progress of SA even further and will be in fact a further economic self-destructive process. The downgrade will have the same impact on the agricultural industry as on any of the other industries in the primary, secondary and tertiary sectors of the economy."