13 June 2014

South Africa: Fitch Negative Rating - Urgent Action Needed By New Finance Minister

press release

The Fitch Ratings revised outlook of the South African economy from "stable" to "negative" must serve as an urgent wake-up call for the new Minister of Finance, Nhlanhla Nene.

Unless he wants to be remembered as the Minister who escorted South Africa into an economic recession, he must act immediately to assert the National Development Plan (NDP) as the only economic blue-print for South Africa, and begin implementing its recommendations without delay.

Indeed, the policy inconsistency and lack of leadership needs to come to an end immediately.

The poor track record of some key ministerial appointments, shortcomings in the country's administrative capacity, according to the agency, will continue to expose South Africa to further downside risks - this is worsened by bulging government debt expected to peak at 50% of GDP by 2016.

Downward growth revisions have become a persistent feature of the South African economic landscape, pointing to the economy's susceptibility to shocks, weaker growth potential, escalating fears of a coming recession and the loss of existing jobs.

Worse still, should the current trend hold, the unemployed will continue to be locked out of the job market, killing all prospects for living dignified lives.

Fitch also affirmed South Africa's credit rating at 'BBB', practically at bottom of the class with respect to investment-grade scale.

Adding to the list of woes, the country's GDP outlook also suffered a downward revision from 2.8% in December 2013 to a forecast 1.7%. This follows a recent downward revision of South Africa's growth forecast for 2014 from 2.7% to 2% by the World Bank.

Minister Nene must show the requisite fortitude and introduce needed reform in order to turn the South African economy around.

Over the years the DA has proposed numerous reforms which would revive our economy. These include:

- Providing political leadership and restoring investor certainty by speaking with one voice on the economy and implementing one plan in the form of the NDP;

- Boosting trade with the rest of Africa through trade-focused diplomacy and cutting the costs of trading across borders;

- Making it easier for South Africans to start and grow their own businesses by cutting red tape and providing more support for entrepreneurs;

- Investing 10% of GDP in infrastructure to reduce the cost of doing business;

- Making sure that labour laws support job creation by achieving a balance between the protection of workers' rights and the need for labour market flexibility in support of job creation; and

- Managing public money better by combating government corruption and making sure that government spending decisions are taken in the best interest of all South Africans.

South Africans deserve a government that will safeguard their jobs and facilitate new ones for the unemployed.

We challenge the Minister to urgently announce a turnaround plan and implement pro-growth economic policies - as set out in the NDP.

He has the plan - now he must implement it.

Dion George, Shadow Minister of Finance

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