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We are hardly through the first quarter of the year, yet 2018 is already being described by many South African business people as one of the most promising years we’ve had in recent times.
The late-night announcement last Friday by Moody’s on South Africa’s credit rating was yet another standout development.
While many anticipated, or rather hoped, for Moody’s to retain South Africa’s credit rating at investment grade, the ratings agency surprised many by going a step further and changing its outlook to stable.
This is a sign of greater confidence in the country by Moody’s, at least, and an indication that recent developments, mainly in South Africa’s political realm, have paid off.
The Moody’s decision reflects the positive sentiment that prevailed as a result of the election of Cyril Ramaphosa as president; along with the subsequent Cabinet reshuffle that brought credible, tried and tested ministers such as Nhlanhla Nene and Pravin Gordhan back to senior positions in Cabinet; the overhaul of the boards of SAA and Eskom bringing in experienced individuals with credible track records; and the steps being taken to root out corruption and deal with state capture.
These changes have clearly found resonance with Moody’s, and with the rest of the investor community, one hopes.
However, if we are truly going to succeed in wooing investors then this is just the beginning.
The decisions made thus far need to be followed by concrete actions to ensure accelerated and inclusive economic growth that will generate employment and ensure the transformation of the economy.
But for now, we do have some breathing space.
We must commend the Moody’s decision and the reasons provided therefore, with particular reference to the three strategic drivers that were identified by Moody’s as required for inclusive growth and employment, namely:
• Halting deterioration in the institutional framework, with reference to changes in political leadership, the role played by the judiciary, the Reserve Bank, the media and the recent steps to restore state-owned enterprises and bring confidence to Sars;
• Improved performance and growth prospects evident through exceeding recent growth projections and greater business and consumer confidence; and
• Fiscal adjustment plans to stabilise and reduce debt through material cuts in expenditure and rising of revenue through a number of sources, including VAT.
In its announcement, Moody’s also identified the importance of sustained implementation of structural reforms, which we all recognise is a key challenge.
Sustained implementation, together with the need to address remaining uncertainties and make hard political choices in relation to policy areas such as land expropriation without compensation, the mining charter, public sector wages and the state of state-owned enterprises, particularly Eskom, are key.
Business relies heavily on a stable policy environment – greater certainty is an imperative going forward.
In addition to this, it is vital for business to be involved in informing the development of policies that are evidence based, fit for purpose and that will enable businesses of all sizes and sectors, but particularly start-ups and smaller businesses, to expand, employ more people and contribute to inclusive growth.
Energy policy, to be articulated in the updated, evidence based and consulted integrated resource plan and integrated energy plan, as well as policy pertaining to higher education and training and land are just a few examples of policies that need to be urgently and comprehensively addressed.
A more positive sentiment was already apparent when Finance Minister Nhlanhla Nene, accompanied by team South Africa, met with sovereign rating agencies as well as with international investors earlier this month during the post-budget international investor roadshow.
We are hopeful that as the country takes incremental steps to deliver the objectives set out in President Ramaphosa’s state of the nation address, that Standard and Poor’s and Fitch will also reconsider their investment ratings of South Africa and adjust them upwards.
This will contribute to reigniting the virtuous circle of economic recovery, fiscal consolidation and raising social cohesion as identified by Moody’s.
We have no doubt that hard work lies ahead to keep us on the path of economic recovery and transform the structure of our economy, but given recent events, endorsed by the Moody’s decision, it appears that we have now turned the corner.
• Tanya Cohen is chief executive of Business Unity South Africa
