Bokang Moeko

The 3rd of June marked a very important day in South Africa: a day the ratings agency affirmed SA’s ratings but kept its negative outlook.

But it is not yet time to celebrate. The euphoria might be short-lived. What only happened is, SA was given a chance to tighten its belt to avoid a downgrade later.

The finance minister has already told the Bloomberg TV that the acid test will be in December “particularly in terms of implementing what we’ve decided”.

No one is cynical but you can bet your bottom dollar that, if the government fails to effect the promised reforms, South Africa will be downgraded in December.

Time is not on SA’s side and it means a significant progress must be quickly made in cutting the red tape that is hampering entrepreneurs and in overhauling the poorly managed parastatals that are bleeding the fiscus dry.

Kimi Makwetu’s latest local government audit results demonstrate, fruitless and wasteful spending by municipalities has almost doubled over past five years.

And right now, the country can simply no longer afford the billions of rands that are being frittered away by councils while services continue to be patchy at best.

“To avoid a downgrade later in the year, the government will have to demonstrate a commitment to decrease spending. The government desperately need their income to increase. In order to do this the government will have to focus on measures which will grow the country, reduce the unemployment rate and increase the tax base,” Kimi said.

But government’s endeavour to create employment will be greatly challenged by the recent shocks to growth and inflation which have created uncertainty. Recall, unemployment increased by 2.2 percentage points to 26.7 percent in the first quarter of 2016, according to fin24, compared to the fourth quarter of 2015. This is the highest rate since 2008.

The biggest job losses were observed in trade (119 000) and manufacturing (100 000) and construction (77 000).  Reasons cited for such pervasive job-shedding is that profits in SA’s primary and secondary sectors have been under acute pressure for some time.

The economy has also been hit by a ravaging drought and the prospects are not promising, the Govenor Lesetja Kganyago said.

Data from the South African Human Rights Commission (SAHRC) shows that, of 19 million credit active consumers in South Africa, over half have impaired credit records, three months plus in arrears. That is bad news as this is dragging down the economy.

All these may be signs of worse to come. Maybe, we are yet to see an instant of pure, blinding, utterly intense bluish-white light cut across the sky, followed by searing heat, a thousand-fold crash of thunder, and finally an earth-shaking blast that will send a mushroom of dust and debris boiling up to 50 000 feet. That is the impact the junk status will have on the poor.

Reality is forcing us to not hope for the best. Especially when the SA governance seems to be at its worst. And governance is a very important component when analyzing the credit matrix of a country.

Poor governance is South Africa’s main challenge right now. Allan Greenblo editorial director of Today’s Trust has said it is funny in a manner of speaking, how little is learnt from history. Paradoxically, given their long struggle of one against the other, the present ANC is exhibiting some discomforting similarities with the previous National Party government.

It was 31 years ago that the then President PW Botha delivered his so-called Rubicon address, which he failed to deliver the reform policies that the world had been led to expect. Similarly today, President Jacob Zuma faces a Rubicon which he addresses by contradictions.

The waiting has begun, but nobody knows what to expect. But we can bet on it,business and investor confidence might be shattered.

Allan said the test would be whether Zuma white-ants the efforts of Gordhan (if not Gordhan himself) to assert fiscal discipline, insist sound governance in the state and state-owned enterprises, and stimulate economic growth.

According to him, these are three prerequisites to avoid a relegation of SA sovereign credit to sub-investment grade. And, should relegation not be avoided, junk status will herald disinvestment on a scale akin to the late 1980s.

From what media is telling us, it is easy to conclude that there is a split in the ANC: the rent-seekers and the contributors. And name President Jacob Zuma a rent-seeker par excellence; the poster boy of rent-seekers.

Someone who abuses his position as head of state and leader of the governing party to serve his own interests and those of his clan, sycophants, strategic allies and business benefactors.

In times like this we wonder what will be chosen: self-enrichment at the cost of undermining South Africa’s economic prospects or for the first time, people will come first as they should be?Nobody knows, we just have to wait and see!

But you can be warned as a Mosotho (that is everyone one who lives in Lesotho): The economic situation remains dire with major price increases working their way through the economy caused by prolonged drought and the declining rand.

So deeply indebted consumers should not view South Africa’s unchanged credit rating by S&P as a reprieve to go on a spending spree.Remember, if you cannot afford it, and you don’t need it. Don’t buy it. In this time, you do not need non-essential luxury items that include extravagant buys on smart TVs, gaming consoles, and even taking out pay day cash loans.

All of us should use good judgment and stay within our borrowing limits. That is the key to keep our individual situation in check and help the economy at the same time.


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