2017-02-03 14:19

I was astounded to read that the ANC Women’s League, COSATU, the SACP, and the ANC’s Secretary-General, Gwede Matashe, have ALL recently adopted the stance of accusing Standard and Poor’s (S & P) of meddling in the internal affairs of the ANC and, more specifically, of trying to influence its Presidential succession battle.

The accusations arose because of a comment recently made by Konrad Reuss , S & P’s Managing Director for SA/Sub-Saharan Africa.

Reuss was reported to have said the following:

“… do the right thing and do it while you go on contesting for your leadership.” (clearly referring to the ANC’s Elective Conference, scheduled for December this year).

Some are now wanting to know whether Reuss’ comment was said by him, in his personal capacity, or in his capacity as a Regional CEO of S & P’s – given his position in S & P position, I don’t believe that it makes any difference at all whether he made the comment in his personal capacity or not!

Whilst Mantashe and these entities have chosen to regard such a comment as meddling in the ANC’s internal affairs, it would perhaps be wiser for them to regard the comment as a friendly warning, to the governing party, not to do anything that could cause credit rating agencies to downgrade the SA economy to “junk status” – a level at which it is currently barely above!

It’s common knowledge (at least to the well-read/educated) that a downgrade to “junk status” would have a catastrophic effect on the SA economy.

Such a downgrade would lead to large-scale disinvestment (loss of jobs); significantly reduced new “inward” investment (no new jobs and therefore greater unemployment); difficulty in borrowing funds from foreign lenders (and thus being in a position without funding to build/maintain infrastructure etc); and with a materially increased cost of borrowing the billions of Rands needed by a developing economy with a growing population (that’s if SA, with its “junk status”, was able to borrow foreign funds!!) … and there would be many more negative effects!!

As one of the World’s “Top Three” credit rating agencies, S & P’s credit rating of SA has a massive effect on international perceptions of the “health” of the SA economy – and perceptions are always all-important!

Love them, or hate them – one ignores credit rating agencies at one’s own peril!

I would say that when one of S & P’s senior office-bearers, such as Konrad Reuss, offers some advice to us, we should not regard it as “meddling in the internal affairs of political parties”, but rather be grateful to him and accept it in good faith – better that than to be told after a credit rating downgrade to “junk status” that the downgrade was made because of “political risk associated with in-fighting within the ANC”.

Gwede Mantashe was reported to have said the following:

“… we must always ensure that we are not working for rating agencies. We do what is right for South Africa and rating agencies must rate us on our work.”

For Mantashe to glibly say that SA must do what is right for it and let the credit rating agencies be allowed to get on with their job (and do their damnedest!), shows a lack of appreciation of how relevant the views of the credit rating agencies are to the future of the SA economy!

Do those who chose to ignore warnings emanating from the credit rating agencies know that many foreign governments and investment funds have laws/regulations that prohibit such entities from invest in countries that aren’t graded as “investment grade” by these credit rating agencies?

Perhaps they need to know this?


A country’s political stability must always be assessed when it’s being rated bt a credit rating agency – that’s because investors avoid investing in politically unstable countries – that’s because they want their investment to be safe/secure and, if necessary, to have no problems in one day realising that investment and repatriating their investment funds back to their home countries.

Very simply – if a nation wants to attract investment (BOTH foreign and local) it needs to show that it’s politically stable.

The “bottom line”, therefore, is that given SA’s high level of unemployment, and the socio-economic problems associated with that that, it would be highly irresponsible for those in Government to be so offended by Reuss’ comment, that they go so far as to ignore it!

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