[LISTEN] Ratings agencies seek urgent implementation to avoid another SA downgrade

International ratings agencies Moody’s and Fitch have raised a red flag, warning the South African government that it needs to urgently implement policies and the growth plan to avoid further downgrades of the economy.

The two agencies announced on Friday that they are further downgraded South Africa’s investment grade into junk status.

Professor Raymond Parsons from the Faculty of Economic and Management Sciences at the North West University Business School says the South African government now needs to show that its prepared to make the adjustments that have been the subject of discussions and budget speeches since before the outbreak of Covid-19.

“We have got to understand that we are in a situation now where there will be no gain without pain. It’s really a question now not of saying what we will do, but to demonstrate that we are doing it and it is being done,” says Parsons.

He adds that even though the third ratings agency, Standard and Poor (S&P) has kept their investment outlook as neutral for now, this is the worst ever rating for South Africa.

“These ratings again confirm the seriousness of the growth and fiscal risks faced by the economy and highlight the urgent needfor SA to improve its economic narrative. It also puts the right fiscal ‘mix’ in the main Budgetnext February into even sharper focus,” adds Parsons.

Parsons adds government needs to take notice of the warning by the ratings agencies of a ‘credibility gap’ when it comes to the new Economic Reconstruction and Recovery Plan (ERRP) and the recent Medium Term Budget Policy Statement (MTBPS), there is a ‘credibility gap’.

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Parsons says the administration of President Cyril Ramaphosa now has to chart a course towards renewed growth and fiscal sustainability in order to avoid a second round of downgrades in the medium term.