South Africa’s credit rating downgrade will also hit SADC region, says AgriSA

11th April 2017 By: African News Agency

AgriSA said on Tuesday that the impact of South Africa’s foreign currency credit rating downgrades was likely to be felt outside of the country’s borders and would have an impact in the Southern African region as a whole.

South Africa’s foreign currency credit rating was downgraded to junk status by the S&P Global and Fitch credit rating agencies in the wake of the Cabinet reshuffle which saw Pravin Gordhan axed as Finance Minister.

President of AgriSA, Johannes Möller said in a statement that the downgrades would impact neighbouring countries because South Africa is often viewed as the gateway to Africa in terms of investment and logistics, whilst also being a major trading partner for many of these countries.

“The full impact of the South African credit ratings downgrades is still uncertain but it will be short-sighted not to expect that it will have an impact on our region and that it will most certainly also be felt by our neighbours especially in the Southern African Development Community (SADC),” Möller said.

Möller said that if South Africa’s economy was to move into a recession, it would lead to a reduced demand for imports in general and equally so for the country’s neighbours.

“Livestock imports is a case in point as it is general knowledge that meat consumption is directly correlated to economic performance in South Africa; if we were to move into a recession the impact on our neighbours, some of them being heavily reliant on South Africa for these kinds of exports, is obvious,” Möller said.

“In the customs union (SACU) reduced imports will also impact negatively on the customs pool – a major source of income for the BLNS countries [Botswana, Lesotho, Namibia and Swaziland]. A depreciated Rand is also, despite its normal quality of supporting exports, not going to save the day for the region.”

Möller said not only were the credit rating downgrades deserving of focused attention by the social partners inside South Africa, but members of the SADC should also contemplate joint solutions to deal with this situation.

“We trust that the government and specifically also President [Jacob] Zuma will take the lead in devising plans to restore the dignity of our country also in the interest of the region,” Möller said.