Picture: 123RF/Bertrand Iniesta
Picture: 123RF/Bertrand Iniesta

The message from the outlook downgrades by Moody’s and S&P is that SA’s public finances are in an increasingly intractable crisis, given the dim prospect that the government will implement the economic and fiscal reforms to halt their slide.

When Moody’s cut SA’s ratings outlook to "negative" early in November, leaving SA on the cusp of junk, it signalled its "rising concern" that the government would not find the political capital to press ahead with intended reforms, and that its plans would be largely ineffective in lifting growth.

S&P made much the same point at the weekend, noting that factions within the ANC have blocked key reforms to the labour market and state enterprises.

It’s a crushing verdict. Essentially, the main ratings agencies think it’s increasingly unlikely that President Cyril Ramaphosa will halt SA’s slide.

Ever valiant, the National Treasury’s goal is still to stabilise the debt ratio. It has warned of dire consequences should SA fail to do so: mounting debt service costs and escalating interest rates would raise the cost of borrowing and squeeze out government’s ability to provide services.

SA is possibly already at a point where the deterioration in its public finances has become irreversible. The ratings agencies understand this — even if SA’s politicians and trade unionists do not.