Picture: SUPPLIED
Picture: SUPPLIED

The National Treasury sees the downgrade of the country’s debt to junk by Moody’s Investors Service as an opportunity to start fixing the economy.

While the annoucement that was made close to midnight on March is expected to add to the deterioration in the rand’s exchange rate, the country is now “given an opportunity to do the things we are supposed to do,” Tshepiso Moahloli, acting head of asset and liability management at the National Treasury, said on a call with reporters on Sunday evening.

Moody’s cut its assessment of SA’s debt to sub-investment grade, saying unreliable electricity supply, persistent weak business confidence and investment and long-standing structural labour market rigidities continue to constrain economic growth.

The coronavirus pandemic means the country is entering a period of much slower global growth in an economically vulnerable position, the company said.

Ratings agency Moody's moved South Africa to "junk" status on March 27 2020 after revising the outlook on the country's last investment-grade credit rating to "negative" because of a slowdown in economic growth and rising debt burden. Mudiwa Gavaza gives us the breakdown on what it means for SA.

“We take this downgrade as an opportunity do the right thing,” Moahloli said. Otherwise “we won’t be able to offer the social and economic programme that had been promised to South Africans,” she said.

Africa’s most-industrialised economy is stuck in the longest downward cycle since at least 1945 with business confidence that’s at the lowest in more than two decades and almost a third of the labour force unemployed.

Output is also weighed down by power-supply constraints and delays instructural reforms due to political bickering.

“Throwing more money into the economy is insufficient and unsustainable,” deputy finance minister David Masondo said. “We need to move with structural reforms.”

Bloomberg