JOHANNESBURG-The decision by rating agency S and P Global to downgrade South Africa’s long-term local currency rating and the long-term foreign currency debt has serious consequences for the poorest of the poor, with a catastrophic impact on the country’s economic prospects, the Banking Association of South Africa (BASA) said on Saturday.

While S and P did move South Africa from negative watch to stable, the agency noted that economic policy in our country is currently focused on redistribution and not growth, which has caused it to stagnate, BASA MD Cas Coovadia said.

Fiscal policy needed to be adjusted to make the hard decisions that drove competitiveness and growth. Political meddling in our institutions and continued bailouts of non-performing SoEs [state-owned enterprises] is wreaking havoc on our economy, he said.

The country needed a clear, stable, and certain policy to generate economic growth. We repeat our call that it is imperative that the ANC emerges from its elective conference (in December) with a new leadership that grasps this urgency and is committed to placing our economy on a path of growth, competitiveness, and inclusiveness.

Anything else will accelerate the downward spiral of declining confidence, reduced investment, slower growth, weaker public finances, and greater inequality. We can no longer afford to do nothing, Coovadia said.

On Friday, S and P lowered South Africa’s long-term foreign and local currency debt ratings by one notch each to BB and BB respectively, citing weak real nominal GDP growth that had led to further deterioration of South Africa’s public finances beyond the rating agency’s previous expectations.

Nonetheless, S and P changed the outlook to stable from negative, saying the stable outlook reflected their view that South Africa’s credit metrics would remain broadly unchanged next year, and political distraction could abate following the African National Congress’s elective conference in December, helping government focus on designing and implementing measures to improve economic growth and stabilise public finances.