Business alone cannot keep South Africa from junk heap, says economist

HE government would have to meet business halfway if it wanted to avoid a sub-investment credit rating in December, an economist warned on Tuesday.

This comes as the business working group, which worked in tandem with the government and labour to avert a downgrade by S&P Global Ratings, says much more needs to be done before the agency next reviews the rating.

"Business, as is government, is aware that the next six months are critical, and there is a need to step up the implementation of the nine-point plan and other measures to boost the economy," said Jabu Mabuza, Telkom chairman and one of the business leaders heading the group.

The plan includes appointing professionals to state-owned enterprises and establishing an anticorruption body to oversee the public and private sectors.

After S&P announced the results of its review, the business sector released further steps it would take to avert a downgrade including launching a R1.5bn entrepreneurship fund; developing investment projects in tourism and agriculture and continuing work on the nine-point plan.

"The CEOs’ initiative is very much continuing to work with all our work streams in overdrive mode as we need to show some deliverable results, come December," said Mabuza.

But Citibank economist Gina Schoeman said the efforts of business had to be matched by the government and labour.

"I doubt that S&P believes the problems lie in the hands of business," she said. "More than anything, S&P’s statement last week made it abundantly clear that to avert a foreign currency downgrade, reforms would be necessary in mining and labour, and those two areas sit squarely on the shoulders of labour and government."

Schoeman said the business sector had identified the core problem in SA’s economy — the need for structural reform — but the effect of its solutions on growth in the next six months would be impossible to measure.

"What’s more, there is likely a long lag between these initiatives and actual GDP growth."

It was possible to avoid a downgrade in December, Schoeman said, if the Treasury’s medium-term budget policy statement met fiscal targets set in February’s budget and no further medium-term downward revisions were made to economic growth. The government would need to announce policy reforms, such as a secret ballot for workers, and wrap up changes to the Mining Charter.