JOHANNESBURG, South African Reserve Bank Governor Lesetja Kganyago has urged South Africans take the concerns raised by the international rating agencies seriously.
Speaking during the central bank’s monetary policy forum road-show in Soweto, Johannesburg, Wednesday, Kganyago spelt out the impact of the recent downgrades by two of three major international rating agencies on the economy and the poor.
The aim of the road shows is to demystify the role of the central bank in the economy. However, the recent economic and political developments dominated most of the discussions at the event.
Kganyago warned about the outcome of a possible downgrade by all three rating agencies. He told the Soweto community members and business people that such downgrades would severely impact the government’s service delivery.
Calling on all South Africans to protect the current investment grade on the local currency, he said: “It’s important to understand that when the cost of government goes up it has to first service that debt before it pays grants or hires a teacher.”
Kganyago said he had had several meetings with both President Jacob Zuma and new Finance Minister Malusi Gigaba to discuss the impact of the downgrade.
“Minister (Gigaba) said that he was going to brief the social partners at Nedlac (National Economic Development and Labour Council) about the impact of the rating downgrade so that South Africa can marshal its forces and protect the rating we have and see steps to be taken to address the concerns raised by rating agencies.”
Kganyago believes the country should avoid a sub-investment rating on its currency by all rating agencies. South Africa’s Rand-denominated debt still enjoys an investment grade by Moody’s and Standard and Poor’s. The two ratings have only lowered the rating on the country’s foreign debt. Ratings agency Fitch downgraded both the foreign and local denominated debt.
“That we deal with those concerns of rating agencies to prevent us falling into sub-investment grade. If we do it means investors are no longer allowed to lend money to South Africa.”
Reserve Bank Deputy Governor Kuben Naidoo said South Africa should ensure that it remains attractive to investors who are mainly from Europe and the United States.
Source: NAM NEWS NETWORK