BLSA CEO Bonang Mohale
Ratings agencies are looking for institutional, economic and financial stability as well as resilience, Bonang Mohale, CEO of Business Leadership South Africa (BLSA), said on Friday.
"While they are looking for stability and continuity, South Africa seems to be giving it the opposite," he said as guest speaker at an event hosted by the Ubuntu Foundation and the Konrad Adenauer Foundation in Cape Town.
"When you are borrowed to the hilt, you do not call the shots. You have to play by the rules of ratings agencies. If I take out a bond on my home, the bank sets the interest rate," he said as comparison.
"For 20 years we loved it when ratings agencies said South Africa is Africa's springboard...and then, over the last few years when Fitch and Standard and Poor's downgraded us, we suddenly asked 'who are these ratings agencies'?"
He said it surely must give some South Africans "a bit of indigestion to wonder how the country of Madiba's dreams, the country we have been praying for, gets it so wrong".
He pointed out that, had Moody's downgraded South Africa beyond investment grade a few weeks ago, R100-billion would have "walked off our shores" as investment outflows owing to the prescriptions of the mandates of certain asset managers.
"This is almost the same amount as the target President Cyril Ramaphosa set for us as business to raise in investments in five years," said Mohale.
He pointed out that the 53 members of the BLSA together represent more than half of South Africa's gross domestic product.
"Had Moody's downgraded South Africa, it would have cost the South African government more to borrow and State-owned enterprises too. When it costs South Africa more to borrow, it would have been more than the R20-billion we use today just to service our debt," he said.
"The South African Reserve Bank would then have witnessed a run on the rand and it would have had no option but to increase interest rates to protect the currency and manage inflation. You would have paid more for your bond and cars, so ordinary South Africans' quality of life would have deteriorated."