On 13 June 2014 the Fitch ratings agency revised the outlook on South Africa to negative from stable and affirmed its credit rating at ‘BBB’.
Standard and Poor’s, meanwhile, also downgraded the country’s sovereign credit rating to BBB-.
In Business Day TV’s “The Week That Was” show, Sasfin Securities’ David Shapiro said that people will be well advised not to come into South Africa’s bond market.
“There is too much risk on the horizon. There are too many uncertainties about where the country is going as an economy,” said Shapiro.
South Africa’s poor ministers a problem
One comment from Fitch stood out in its South African rating: “In Fitch’s view, the track record of some key ministerial appointments and shortcomings in administrative capacity mean this is subject to downside risks.”
Many people were critical towards President Jacob Zuma’s ministerial choices. The fact that a rating agency mentioned it as a downside risk tells us just how bad these choices were.
Shapiro agreed that SA’s new ministers are not good enough, questioning whether an investor would put their money into a company which our ministers ran.
“If these chaps were running even a division of a business would I be there – the answer is no. Just an absolute no,” said Shapiro.
“They are driven by mad things – not the desire to actually build things,” he said. “Political ideology is still very much part of where this country is going.”
Concerns about SA economy
The show’s panelists – Shapiro, Simon Brown and Giulietta Talevi – said that whether South Africa is in a recession is academic.
The reality is that South Africa is in a tough spot economically, and the country needs to grow at 5% to address the challenges it faces.
The bad news, they said, is that many local companies are divesting in South Africa – partly because of a lack of trust in the local economy.
“All you have to do for guidance is to read company reports. If you see where businesses are going – they are moving their investments overseas,” said Shapiro.
“It is a quiet withdrawal from South Africa, and you don’t even know it is happening.”