By Raymond Parsons, Professor at the North-West University School of Business and Governance
Together with Moody’s and Fitch, Standard & Poor’s decisions must be seen as friendly warnings, rather than as reprieves, about what SA is seen to be doing and implementing over the next few months. Although the S & P assessment also recognises the changes and improvements made so far in certain areas of policy, the reality is that the economy remains on the cusp of ‘junk status’.
SA is still at only one notch above ‘junk’ in both Standard & Poor and Fitch assessments. SA needs to break this mould sooner, rather than later, by implementing polices which put SA on a much higher growth trajectory.
In the next few months the burgeoning collaboration between government, business and labour must therefore begin yield further tangible results which are aimed at improving growth prospects, as well as staving off future investor downgrades. Investor confidence remains a key requirement to underpin growth and job creation, and to avoid a ‘low growth trap’.
SA now has the opportunity to make 2017 a crucial year in which turn the economy around and to push the growth rate above 1% in 2017, and perhaps even to 2% by 2018. This now lies mainly in SA’s hands and all roads eventually lead through a much higher inclusive growth rate than the current 0.5%.
To unlock its true economic potential SA must boost long term investor confidence by progressively building on its strengths and urgently addressing or eliminating its persistent weaknesses.
The invasive and corrosive political and policy uncertainty which presently adversely affects economic performance must be reduced to the point at which SA will welcome, rather than fear, future credit rating economic assessments.