South Africa will be in ‘junk

South Africa will be in ‘junk status’ for another six years – AFIS Economist

Zuma’s legacy

South Africa will be in ‘junk

The prediction may sound gloomy – and six years of being referred to as ‘economic junk’ isn’t a walk in the park – but this economist sees light at the end of the tunnel for South Africa.

Lesiba Mothata is the executive chief economist for Alexander Forbes Investment Solutions: Though he predicted the credit rating would stay until 2023, he maintained it wasn’t ‘the end of the world’.

In fact, Mothata has found reasons to be enthused by SA’s reaction to the downgrades implemented by credit rating agency Moody’s earlier this year:

“People ask if SA is more like Zimbabwe or more like Venezuela. Yet, we have seen the spectacular bond performance and globally it looks like there will be continued demand for emerging market debt.”

“I am not saying there are no risks. There are, for instance, concerns about left leaning policy here.”


Read: Economists’ first reaction to SA’s junk status downgrade by rating agency

Mr Mothata has said he is confident South Africa can negotiate these stormy seas, but they have to take advantage of growth in sub-Saharan Africa to help them restore confidence in the economy.

The economist concedes it is likely that our status will receive a further downgrade in December (yikes), but he is urging people keep a calmer perspective:

“Don’t have an exaggerated view of the downgrades or its economic outcome. I have a glass half full approach. SA policy error risks are substantial and it has become a confidence issue now. Yet, I believe SA can weather the storm.”


Read: The ANC Youth League reckon junk status is good and welcome the decision

Mothata believes that state-owned entities are causing the most stress to the economy: Transnet and Eskom have been embroiled in scandal in this last year and it’s severely undermined investor confidence.

Privatisation, however, is not the answer in his eyes. Especially not for Eskom, who could “make electricity very expensive”.

Six years seems a long time to wait for economic improvement, but somehow, the rand has survived a barrage of setbacks in 2017. This is our biggest source of optimism.

Well, that and the “This CAN’T get any worse” mantra.