South Africa still had much to do to avoid potentially being downgraded to junk status in the year ahead, with the country having already “dodged some bullets” at the end of last year.
During a panel discussion at Deloitte’s Africa Outlook 2017, Standard & Poor’s (S&P’s) MD Konrad Reuss said the agency still saw more downside risks than upside risks in the country, owing to the negative outlook on the country's ratings.
“There are three topics that will drive the outlook for the country, including gross domestic product (GDP) growth . . . we have certain expectations for [GDP to improve], along with fiscal improvement. If there is no delivery in that regard, it will put pressure on the ratings,” he noted.
Further, Reuss pointed out that weakening institutions that impact on policy frameworks and implementation, could also negatively impact on South Africa's ratings.
However, he added that, as a result of the recovery in commodity and oil prices, goals that were not achieved in 2016 are achievable this year, unless bad policy decision are made.
He added that S&P’s would keep a close eye on State-owned enterprises, the risks emanating from these entities and the pressure this would put on government’s fiscal and debt position. “This could also put pressure on the ratings,” he noted.
Deloitte Africa Emerging Markets & Africa MD Dr Martyn Davies, meanwhile, said countries could learn from their Asian counterparts, where the State is the entrepreneur, to get a similar mindset of competitiveness and entrepreneurial capability.
“One thing I am hoping to see in the year ahead, and our Finance Minister [Pravin Gordhan] could not even say the word last year, is privatisation. Private capital is the greatest force of development and what we are seeing is lethargic growth, a lack of agility, innovation and a lack of high-performance economies on our continent – largely and almost entirely due to poor management reform at State-owned assets,” he said.
Meanwhile, Davies pointed out that, with South Africa’s economy still being 60% driven by its resources sector, it will need to start thinking about the macro-forces that play a role and further focus on becoming an ideas-driven economy.
This, he said, should not only be confined to the borders of the country, but should become the norm for the whole continent.