Some reports on Moody's decision incorrect: Treasury

MAY 10, 2016

The National Treasury has moved to clarify Moody’s Investors Service’s decision on South Africa’s ratings, particularly on the country’s outlook.

In a statement, Treasury said some media reports have said Moody’s has changed the ratings outlook to negative from stable.

“This is not correct. Moody’s has maintained its negative outlook on the rating. The rating was placed on negative in December.

“The review period that started on 8 March 2016 placed the sovereign on a watch for a credit rating downgrade. That review ended on Friday with a removal of the credit watch but the outlook on the rating has been maintained on negative,” explained Treasury.

Meanwhile, government, labour and business on Monday agreed to join forces and implement a number of interventions to boost the country’s economy.

On Monday, President Jacob Zuma convened a meeting with labour and business leaders.

He said while South Africa has recovered from the global financial crisis, the level of economic growth has been much weaker than previously anticipated. Part of this, he said, is due to the challenging global economic environment.

“We recognise as government that there are also some domestic constraints that we must attend to. We are pleased that labour has joined these talks which are aimed at arresting slow growth and to save and create jobs,” said the President.

This comes after Moody’s Investors Service’s on Friday noted that South Africa was approaching a turning point after years of weak growth.

President Zuma said this is confirmation that the collaborative approach has been successful.

Government has translated the National Development Plan (NDP) into an implementable programme and the Medium-Term Strategic Framework which sets out government’s goals and priorities over five years. 

“We have responded to the crisis by introducing the 9-Point Plan to boost growth and employment, within the framework of the NDP.

“The 9-Point Plan focuses on energy, infrastructure development, agriculture and agro-processing, mineral beneficiation, a higher impact Industrial Policy Action Plan, small business development and encouraging private sector investment, amongst others.

“In the last year, substantial progress has been made in these areas,” he said.

However, the President said faster and more successful outcomes will be achieved when leaders work together in pursuing common goals as government, business, labour and civil society.

Initiatives to boost SA economy

To further respond to the challenges facing the country, he said the meeting decided on some short-term interventions, in addition to implementing the 9-Point Plan.

One of these is to reduce policy uncertainty and improve confidence in the government’s ability to deliver on its promise of boosting growth.

There is a need for some concrete initiatives which ensure a turn-around in the country economic fortunes, said President Zuma.

The first initiative is a joint private and public sector fund for small business support. It will be established with roughly 50:50 contributions by the partners.

The focus is to provide “venture” capital-type funding and mentoring to the target groups, especially black entrepreneurs.

Another initiative is to accelerate inclusive growth.

“We must expand investment. In this regard, the model we used for renewable Independent Power Producers offers valuable lessons. As part of scaling up investment, we will move with speed to extend the model to coal and gas as I had announced in the State of the Nation Address in February,” said the President.

The third initiative is to expand government and private sector co-investment in infrastructure.

He said this seeks to use the Independent Power Producer model for other infrastructure investments and explore the possibility of private sector investment in state-owned companies.

The fourth initiative involves exploring appropriate mechanisms of strengthening state-owned enterprises to reduce the risk they pose to the fiscus so they can play a stronger role in driving development.

And lastly, the President said, the credit ratings workstream will identify potential areas of reforms and interventions to avert further credit rating downgrades. The workstreams that were established in February will continue their work and come up with an implementation programme.

“South Africa is now beginning to realize how we can work together as Team South Africa in the interest of our country and people. We look forward to substantial progress being made within a short space of time.

“We remain optimistic that we will be able to weather the storm, especially if we continue working together in this manner,” he said.

The Deputy President Cyril Ramaphosa also attended the meeting, which he referred to as the makings of a compact between labour, business and government.

“This is a new era that we are getting into,” he said, adding that patriotic South Africans have surged to the fore with all leaders in business and government getting together to address key challenges that face the country.

He said the meeting will sit again in the near future.

He commended labour for joining in in assisting government to address economic challenges.

In February President Zuma convened a meeting of chief executive officers of major companies and captains of industry to discuss ways in which they can work together to reignite economic growth and create jobs.

He has mandated the Finance Minister Pravin Gordhan to lead a process of engaging with the private sector, in particular to map out a strategy to the goal of growing the economy.

Discovery Chief Executive Officer, Adrian Gore, said business has committed funds of up to R1.6 billion in the meeting with the intention to make a serious impact.

Gore said there has been positive response from the sector and he hopes that eventually the funds will increase to about R5 billion.

COSATU leader Sidumo Dlamini said labour is willing to make a positive contribution to address the economic plight facing the country. He said the worker’s federation would throw its weight behind the initiatives.

“We are going to [do]… our bit to ensure that our economic output improves,” he said.

Representing business, Business Unity South Africa President Jabu Mabuza said the meeting took a collective responsibility to meet the required inclusive growth to create jobs in South Africa.

He said the need for jobs in the country calls for a festival of ideas in doing things identified as urgent initiatives, which include transforming the economy and reforming how business is conducted in the country.