SA’s radical economic transformation agenda is switching off investors
Ratings firm Moody’s has again warned South African lawmakers that rhetoric and implementation of “radical economic transformation” will hurt the economy and chase away investors.
In a market update issued on Thursday the ratings firm said that it does not expect much in the way of progressive policy reforms from the South African government leading up to the ANC’s elective conference in December.
Moody’s analyst, Zuzana Brixiova said that the ANC government is under pressure to push public spending in response to rising poverty levels, while the economy is flat and state-owned enterprises continue to struggle.
However, continuing on this path will likely push investors away, she said.
“Some proposals, such as the recently drafted mining charter, present risks to growth by reducing regulatory stability and further undermining investor confidence,” Brixiova said.
Other potentially damaging policies include land redistribution and expropriation, preferential procurement and other forms of affirmative actions in employment, ownership and skills development.
The South African Chamber of Mines, meanwhile, has said the country’s mining sector is in a crisis because of minister Mosebenzi Zwane’s handling of the industry.
The chamber’s CEO, Roger Baxter on Friday said that companies have lost faith in Zwane, whose controversial policies have led to a freeze of investment in the sector.
“The industry does not believe that the approaches adopted by the department of mineral resources are serving the national interest of the country,” he said.
According to Moody’s, things like the charter and other ‘transformation’ policies are part of populist rhetoric being used by the ANC as political tools for the elective conference.
Because of this, unpopular policies, like a review on state-owned companies lack commitment, leading to a stalemate.
“We expect that a continued stalemate on structural reforms in the lead up to ANC leadership elections will also continue to depress already weak business confidence, impeding any meaningful rebound from its current 32-year lows,” Brixiova said.
Moody’s downgraded South Africa’s credit rating to Baa3 in June – the bottom of the investment grade table (one notch above junk), with a negative outlook. It is expected to make its next review in November.
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