31 March 2019

Moody’s reprieve an opportunity to institute urgent reforms, says BUSA


  • Political stability required
  • Policy certainty must be prioritised
  • Credible plan for SOEs needed
  • Structural reform critical 
  • Pro-growth roadmap crucial  


Business Unity South Africa (BUSA) calls on SA Inc to effect the urgent and necessary economic reforms following Moody’s Investors Service decision to defer an announcement on the outcome of its review of the country’s sovereign credit ratings.


This is a welcome reprieve and ensures that South Africa will remain in the Citigroup World Bond Index, a key instrument which will enable the Government to continue raising much needed liquidity in the capital markets. SA Inc ought to take this as an opportunity to get its fiscal house in order and its policies aligned to a pro-growth and confidence-inspiring economic strategy, according to BUSA.


The five focus areas that BUSA views as critical in efforts to ensure South Africa retains its investment grade sovereign credit rating are: political stability, policy certainty, the reform of state-owned entities (SOEs), structural reform and a credible growth roadmap.


Political stability

In previous ratings reviews, Moody’s – as well as Fitch Ratings and S&P Global Ratings – had expressed concerns about political noise, noting increased pressure to pursue populist policies and on the country’s oversight institutions. With the General Election scheduled for May 2019, South Africa requires a political trajectory that inspires confidence in its ability to effect an economic turnaround. A free and fair elections process will also bolster confidence in the strength of the country’s institutions.


Thus far, the build-up to the General Election has been peaceful and all registered political parties have agreed to adhere to and subject themselves to the Electoral Code of Conduct.


In light of the ongoing Zondo Commission of Inquiry – and the testimony brought before it about political patronage and its role in state capture – and the recent signing into law of the Political Party Funding Bill, BUSA calls on political parties to be transparent about their sources of funding.


Policy certainty

 Land expropriation without compensation and the visa regime are two of the most significant policy issues that need to be comprehensively addressed. The Government needs to work with social partners in determining timelines, modalities and an implementation framework.


SOE reform

 Eskom remains the greatest risk to the economy and a comprehensive and an aligned position is required between the power utility and its stakeholders on how to effect a restructuring within the context of a broader overhaul of the energy sector.


In its monetary policy committee statement this week, the Reserve Bank revised down its growth forecasts for 2019 and 2020, citing weak business confidence and the potential resumption of load shedding. This highlights the gravity of the situation and the need for urgent intervention.


Structural reform

 South Africa’s skills and education framework remains out of alignment and continues to undermine the country’s growth potential. It has also been referenced by various institutions as a key impediment in realising the country’s growth potential as a developing economy.


Growth roadmap

President Cyril Ramaphosa released the Economic Stimulus and Recovery Plan in September last year. BUSA calls on the Government to move with speed on the establishment of an Infrastructure Fund and to work with all social partners, business in particular, in the formulation and implementation of the steps necessary both to inspire confidence and urgently reposition the country’s growth trajectory.

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