Rating SA’s socio-economic minefield
South Africa’s last apartheid president, FW de Klerk, has blamed the ruling ANC government for the country’s social and economic woes, which have lead to two rating downgrades in the past few months.
In a speech to business leaders late Wednesday (31 October 2012), the 76-year-old De Klerk lambasted the wealth-redistribution policies of the ANC, Sapa reported.
De Klerk hit out at what he called the Marxism-Leninism of some members of the ANC ruling alliance, which he blamed for widespread unemployment and the failure to attract investment.
A recent wave of violent strikes led by miners demanding huge wage increases has rattled Africa’s largest economy and highlighted the country’s huge social discrepancies.
De Klerk acknowledged that some of the country’s woes were inherited from apartheid, but argued that the party of President Jacob Zuma was failing to deal with them.
“The reality is that it has had to contend with enormous socio-economic backlogs inherited from the past,” de Klerk said.
“By the same token, it was also unfair to blame all the problems of the present on the past,” he said, adding that “the ANC was primarily responsible for the current crisis.”
Ratings cuts
As a result of the apparent socio-economic discrepancies, South Africa has suffered not one, but two rating cuts from the three big global ratings agencies for the first time since 1994 – but the South African government insists that this is simply an indication of greater global trends.
On 12 October 2012, ratings agency Standard & Poor’s (S&P) was the latest to cut South Africa’s credit rating down a notch – taking it one step lower than the other ratings agencies.
Speaking to Talk Radio 702’s John Robbie on 15 October, minister of finance, Pravin Gordhan said he was quite surprised by the downgrade, which happened out of the agency’s typical timing.
Gordhan said that the ratings cut was premature, as the other ratings agencies (Fitch and Moody’s) had given assurances that they would revisit South Africa’s rating again in November, after the medium-term budget policy statement and the ANC conference.
“You can see two very contrasting approaches,” Gordhan said.”We can’t afford to be annoyed – we can afford to be disappointed that they (S&P) didn’t stick to their normal process.”
702’s Bruce Whitfield spoke to Standard & Poor’s managing director in South Africa, Konrad Reuss, who said that their downgrade was not premature – and that the agency felt it was necessary to step out of its regular timetable.
“The damage has been done”
“The newsflow has consistantly and continuously been very negative…from our perspective there was nothing in it in waiting any further, the damage had been done.”
Reuss pointed to the ongoing issues in the South African mining sector – which had “mushroomed” into other sectors – as a key factor in S&P’s downgrade.
He also cited job layoffs, slowed growth and a negative knock-on impact on the financial and socio-economic position of the country as determining factors.
“When you think of the medium-term budget policy, if you think of Mangaung coming later in this year – one would have to see a lot of regaining of ground to make good on the damage that’s been done.”
“We take the position that – it’s too late, basically. It’s important now to stabalise the situation.”
The Standard and Poor’s rating downgrade was left with a “negative” outlook – meaning that, should things not improve, a further ratings cut may occur.
“We believe the risks are still stacked on the downside.”
“What we see now is that the policy-making framework of South Africa has changed and what has always been so predictable for so long…has diminished.”
Ratings history
Looking at South Africa’s rating past, since agencies began listing the country as a sovereign entity as early as 1994, it has enjoyed a strong upward trend until now.
South Africa’s Rating History (Click to enlarge)
For the first time since 1994, South Africa has suffered two ratings cuts, with all three ratings agencies – Fitch, Moody’s and Standard & Poor’s – marking the country with a “negative” outlook.
The South African goverment is not oblivious to the sentiment surrounding the ratings cuts – but remains adamant that it is “grossly incorrect to suggest that South Africa is on a downhill slide,” it said in a statement.
“The country may have received a downgrade from two rating agencies, but so have many other countries even in Europe and elsewhere. It is the sign of the times. The world is going through a period of serious economic upheaval,” the presidency said.
Responding to De Klerk’s criticism, provincial secretary Lubabalo Oscar Mabuyane said that the former National Party president had no right to speak against the ANC.
“He forgets that in our 18 years of democratic government, we have done things that they deliberately decided not to do,” he said. “The situation of our economy is because they (the National Party) literally kicked black people out of the economy and society.”
“We will continue with the affirmative action, black economic empowerment programme and other economic development policies that continue to boost our economy,” Lubabalo continued.
“The best thing that De Klerk can do is to keep quiet or try to encourage white South African companies to join the National Democratic Revolution by creating jobs, providing training opportunities and paying black people salaries equal to those of their coloured, Indian and white counterparts.”
(Reporting with Sapa)
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