Stronger institutions can save South Africa from ratings downgrade
Reserve Bank Governor Lesetja Kganyago speaks on institutional strength Cameraperson and editing: Nicholas Boyd 2016/10/20
Reserve Bank Governor Lesetja Kganyago on Thursday warned that the threat of a downgrade to South Africa’s investment-grade rating remained.
Addressing delegates at this year’s South African Chamber of Commerce and Industry convention, he pointed out that political uncertainty, along with falling business confidence, was contributing to the depreciation of the rand, which was unlikely to be a boost to investment and exports.
“There is no doubt that, should a downgrade transpire, it will be reflected through the exchange rate in ways that are not already reflected in current prices,” he pointed out, adding that it would harm the country’s global competitiveness.
Kganyago noted that the country needed, and indeed possessed a number of strong, sound and functioning institutions, and that this was what investors looked for.
Also speaking at the convention, Cooperative Governance and Traditional Affairs Deputy Minister Andries Nel said South Africa could not afford a downward spiral, as it would deepen social tensions.
He called for stronger and better leadership in government, as well as for the total eradication of corruption in its ranks, as the “high corruption levels frustrate society’s ability to operate fairly and efficiently”.
Nel further noted that, despite healthy balance sheets, many of South African corporations were not investing as a result of the continued distrust between government and business.
He said government would continue to work with business to build trust to encourage long-term investment, but urged the business community to also play its part.
“Companies cannot grow unless they operate in an environment where employment and income levels are rising,” he said, pointing out that it was in business’s interest to grow faster and employ more people.
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