South Africa: Allow the Rating Downgrade and Use It to the Advantage of the Country


South Africa's GDP growth rate has for the past five years battled to rise above 3.5%. Any celebrations of a dodged recession are premature. Treasury has insisted on implementing austerity measures on an economy that is battling to grow. For anyone who understands basic economics, this policy stance is counter-intuitive.

In economics, we are taught that during tough times an expansionary fiscal policy stance is needed. South Africa, on the other hand, has managed year after year to embark on austerity and tight fiscal measures despite a mired economy. This stance has been adopted in part as an effort to balance many of government's neoliberal policies including appeasing the very much visible hand of the rating agencies.

The outcome of this is a tightening economy struggling to create employment. In the third quarter of 2019, unemployment grew to 29.1%. The ongoing protests at SAA as a result of threats to retrench more than 900 staff, should come as no surprise. This is the government's ploy of restructuring SOEs in efforts to "grow" the economy, a highly misplaced policy stance. Yes, proper management of SOEs is needed, but retrenching 900 underpaid workers will not solve the bigger management and political interference...

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