Fears over SA’s credit rating

Finance Minister Pravin Gordhan met about 60 chief executives at a packed Nedbank boardroom at the weekend to discuss how SA should avert a downgrade to its sovereign credit rating.

There are deep concerns about the effect of a possible downgrade on SA’s cost of borrowing‚ the financial markets and on business and ordinary South Africans.

Finance Minister Pravin Gordan
Finance Minister Pravin Gordan

Last week‚ ANC secretary-general Gwede Mantashe, said negative growth and another downgrade must be avoided at all costs and that SA had to do “everything” it could to avoid a recession.

In December‚ Fitch Ratings downgraded SA’s credit rating from BBB to BBB-‚ just one level above sub-investment grade.

Last month‚ the International Monetary Fund slashed SA’s economic growth forecast to less than 1% for this year.

Gordhan said at the weekend it was important to point out that during the global financial crisis and the 2009-14 period‚ it was emerging markets that “used their fiscal space to support global growth”.

This meant emerging-market countries had to accumulate some debt.

Among the ideas discussed at the two-hour meeting were bringing in private sector capital to support infrastructure investment and to partially privatise energy assets such as Kusile and Medupi‚ a source who attended the meeting said.

The idea is to allow private partners to inject some capital similar to the public and private partnership model at Telkom. There was also a call to transfer some talent from the private sector to the boards of state-owned entities, so as to assist with governance.

The government has had to make billions of rand in guarantees for some state-owned entities‚ and in so doing‚ locking up much-needed capital.

The meeting‚ held at Nedbank’s head office‚ was led and coordinated by businessman Jabu Mabuza together with leadership in the Old Mutual group of companies.

It was attended by CEOs of SA’s big four banks‚ captains of major insurers and mining houses.

Gordhan attended the meeting with Deputy Finance Minister Mcebisi Jonas and Treasury director-general Lungisa Fuzile. The finance minister said the meeting was a continuation of the government’s consultative meetings that started before and during the World Economic Forum in Davos.

“We thought it was important to work with Mabuza and his colleagues on the question of the credit ratings in SA which is a concern for government‚ business and the public more generally‚” Gordhan said.

“It was a very constructive meeting …we had the opportunity to convey our analysis on the economic environment and they shared some useful thoughts on what we could do together.”

Old Mutual emerging markets chief executive Ralph Mupita said: “From an Old Mutual perspective‚ we certainly believe that in SA we do have a crisis and we can avert it if social partners can focus on actions that can lead to long-term economic growth.

“The 2015-16 budget is critical to averting the ratings downgrade”.


  1. Public sector capitalism has its limits. There is only so much tax and borrowing available to achieve their objectives. Private capital is not to be trusted. Yet, when adverse economic winds blow, private capital can fill the gap. This is why the two major political parties in developed countries are divided in philosophy between those who lean towards public sector capitalism and those who lean towards private sector capitalism.
    The ideas expressed in this article are crucial to getting South Africa out of the poo. If the ANC can, as it espouses, be the party for all, then the “talents” of the private sector in this crisis need to be engaged. However, I have my doubts that this party can spread its philosophy so far. My opinion is that “private sector capitalism” somewhat equates to “white capitalism”. That does not fit in with the message the ANC sells. With the municipal elections coming up, the Opposition would be hesitant to make policy statements about these ideas but is there time?

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