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Trudi Makhaya: Hope for SA despite junk-status red flags

President’s economic advisor speaks ahead of the investment summit this week.

As South Africa heads into its second annual investment conference on the back of Moody’s revising the country’s credit outlook from stable to negative, President Cyril Ramaphosa’s economic advisor Trudi Makhaya says the country is on the right track to turn the ship around. 

Makhaya was speaking at the Impact Investment Forum alongside executive chair of DNA Economics and chair of the South African Impact Investing National Task Force, Elias Masilela.

Moody’s announced its decision shortly after Finance Minister Tito Mboweni’s mid-term budget policy speech last week, which brutally outlined government’s progressively weakening fiscal position characterised by rising debt levels and stagnant economic growth saying there is a “material risk” that government will not succeed in arresting the downward trend. 

10 wasted years 

Asked why the president’s investment drive is critical in light of the review by Moody’s, Makhaya explained that at the centre of the rating agency’s concerns has been government’s fiscal stability – including the debt-to-GDP ratio that Treasury estimates will be north of 70% by 2023.

Makhaya said the reason the country is in this position goes back to how the state ramped up its debt profile over the past 10 years, and “we don’t have much growth to show for it, we don’t have assets that can demonstrate why we did this”. 

In itself, the idea of spending on healthcare and education is not problematic, what is problematic is that we have not had the fiscal multiplier to translate every rand of spending into economic growth,” said Makhaya. 

She said that every rand government is spending should be translating into far more economic growth than currently being seen. 

“Investment helps because it deals with that part of the equation [that] if our growth were to accelerate, suddenly our debt looks minuscule relative to the GDP,” she added.

Policy certainty

Moody’s said that government would have to show that it can contain the rise in debt through a credible fiscal strategy in the 2020 national budget in order to dodge a junk status rating. 

Or, in Makhaya’s words, the country needs to show that the economy is moving and that the state is taking key decisions and that economic growth is “poised to take off”. 

Part of that involves ensuring that the policy environment is enabling for growth.

“I do believe that we are doing that,” she said. 

Since Ramaphosa’s ascension to office, South Africa has managed to finalise the Integrated Resource Plan, the state has a road map outlining its first plans to restructure Eskom, there are talks with a strategic equity investor for SAA, there has been a little progress on visa issues – and, although contested, the government has produced a Mining Charter, said Makhaya.

The point is that the policy proposals have been put on the table [and] things like spectrum have been gazetted, so there is movement.

“In terms of the direction we are taking, we are on the right path to ensuring some of that policy certainty,” she added. 

The conference managed to raise R300 billion in investment commitments last year. While new investments are expected this year, the conference will also provide an opportunity for updates on the progress of the 2018 investments and policy commitments to be provided.

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…I do believe we are doing that…

There’s cognitive dissonance for you, because nobody else believes it.

So Trudi is advising us. Has she ever had a job in the private sector? Seems she has. Then she should appreciate the value of action over words, something our government seems incapable of grasping

What you believe dear lady is irrelevant. Look at the scoreboard. The ANC and friends have looted and bankrupted the economy with impunity and is not held accountable.Trying to obfuscate the obvious by using fancy words wont change reality. Fixing this wont cost one cent. Just abolish BEE and onerous labour laws and put thieves in jail.

This article is hopeful.

I’m hopeful that SA will become a tax-friendly / low-tax country (like Mauritius). Look at their advancing development….clever buggers…lowering income tax to 15% (and no CGT, nor any wealth tax like Estate Duty). Poverty is lifted.

Back to SA:
Am looking forward (hopeful?) to a regime that reduces it’s interference in the private sector.

Am hopeful of a regime taking a pro-business stance, reduce power of labour unions. Anyone uttering the word WMC or EWC gets summonsed to court.

(…suddenly I awoke sleeping on my keyboard…)

WHY does the ANC govt need to “RAISE” investments in the first place??
Why not create the political climate to ATTRACT investments?? (Then it will cost Govt less to drive various programmes to improve economy….just let the private sector investments do its capitalist thing. It won’t cost govt a cent.)

(Can’t recall if say Monaco, France, ever tried to “raise” investments ever? *lol* No….the ANC needs to learn….the money flows to attractive regimes).

Do NOT RAISE investments! Instead, ATTRACT it!!

The fiscal multiplier was neutralized by the ANC cadres and unions.

We-we under the tree. No dear Makhaya. It was not “us” who ramped up government debt with nothing to show for it. It was your beloved party, the ANC, with its unethical leaderhi(t)p bent on instant gratification and retribution. They are finally being shown up for what they really are…..

Ratings agency S&P Global has issued a stark warning to SA, suggesting there is a risk of further downgrades for the country in two weeks’ time.

MD for S&P Global Sub-Saharan Africa Konrad Reuss, speaking at the Consumer Goods Council Summit in Johannesburg on Wednesday, said the ratings agency may further downgrade the country later in November.

“The next big announcement will be on November 22. There will certainly be a very controversial committee discussion because at this point we have a new medium-term budget policy statement (MTBPS) with a lot of bad news but with very little action or action plan.”

His comments come just after Moody’s Investors Service revised the country’s outlook to negative on November 1, citing a lack of action by the government to address increasing state-owned enterprises’ (SOEs) debt, high unemployment, and a deteriorating fiscal position.

Moody’s said on Friday that there is “rising concern that the government will not find the political capital to implement the range of measures it intends, and that its plans will be largely ineffective in lifting growth”.

Moody’s, the last ratings agency to keep SA from sub-investment grade, said “resistance to reforms from key stakeholders limits the government’s room to adopt and implement structural reforms”.

S&P Global downgraded the country to junk status in 2017. Reuss was asked on Wednesday what predictions he had for the meeting in two weeks’ time. He emphasised that the ratings will be determined by “a committee”, but said “look at the data we have”.

He also said that unless the government takes action to improve structural risks to the economy, it could face further downgrades. “It will be a very difficult conversation unless an argument can be made that government will take convincing measures … The risks are clear on the downside.”

Reuss warned that it takes a long time to come back from being downgraded to junk. He said the “weighted average length of time is seven or eight years”, adding that the worst case was Indonesia, which took 20 years. “SA today still has a long way to go back to [S&P Global] investment grade.”

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