Wesgro: Downgrade should serve as wake-up call for SA leadership

Wesgro says South Africans will pay a considerable economic cost as a result of the ratings downgrade.

FILE: Credit rating agency Standard & Poor's. Picture: AFP

CAPE TOWN – Investment promotion agency Wesgro says South Africa’s ratings downgrade should serve as wake-up call for the political leadership in the country.

Ratings agency Standard & Poor’s Global has announced a junk status credit outlook for South Africa.

Wesgro says South Africans will pay a considerable economic cost as a result of the ratings downgrade.

Officials add that the out-of-cycle review stresses the effect political decisions have on the country's economy.

CEO Tim Harris, however, adds the commitment remains to stimulate investment in the province.

“We’re promoting a South African product and we remain deeply proud and optimistic to be South Africans and we remain optimistic about South Africa’s future. We’re also promoting a region in the Cape that remains a strong investment destination.”

The ratings agency says the decision was taken in light of the political and institutional uncertainty in the country.

Meanwhile, as South Africans from different quarters assess the effects of the credit downgrade, trade union Fedusa says President Jacob Zuma is to blame.

General Secretary Dennis George says: “This is the consequences of bad leadership and the current situation is going to fall on the poor and it’s also going to have negative consequences for our economy.”

THE ANNOUNCEMENT WAS NOT UNEXPECTED

There has been general shock by economists to the decision of Standard & Poor’s Global to downgrade South Africa to junk status.

Rating agencies had warned that political instability in the country could lead to a downgrade.

S&P Global has become the first agency to make the move, downgrading the country to BB+ from BBB minus.

The agency has highlighted the executive changes initiated by President Jacob Zuma, saying these have put at risk fiscal and growth outcomes.

Nedbank Economist Isaac Matshego says: “The announcement was not unexpected but these things, when they happen, they still shock us.”

Investment Solutions Lesiba Mothata says there may be more bad news.

“We may have two rating agencies having downgraded South Africa to junk status in under a week.”

Argon Asset Management’s Thabi Leoka says: “They did warn us that they will downgrade us if they felt that politically, politics undermine economic policy adoption.”

(Edited by Leeto M Khoza)