JOHANNESBURG – Moody’s Investors Services, in their November 2019 assessment report for South Africa, highlighted that the “socio-economic features in South Africa including structurally high unemployment and income and wealth inequality are longstanding and deeply-entrenched constraints on the country's growth potential”.
And further said: “Deep inequalities - South Africa's income inequality is among the highest globally, as measured by the Gini index -and resistance to reforms from key stakeholders limit the government's room to adopt and implement structural reforms.”
Which is observed as a reality, novel to the South African economic problems. “In the last two years, it has become increasingly apparent that those constraints are challenging the government's ability to implement reforms that would durably lift growth, to an even greater extent than previously expected.”. This synthesis undertaken by Moody’s was the most effective position that made them uphold the cut but to allow South Africa to work on their challenges facing them and expedite economic reforms.
Moody’s research announcement portrayed a rich picture by saying “Global economy will remain fragile in 2020 as risks to credit conditions rise. The rising political and geopolitical risks are exacerbating slow growth and reducing large economies and emerging markets economies such as South Africa’s abilities to respond to shocks.”
Furthermore: “Trade uncertainty will continue to disrupt supply chains and weigh on investment decisions. Global credit conditions will weaken as a result of growing risks of an economic downturn, trade policy uncertainty and the effects of an unpredictable political, geopolitical environment and the current coronavirus pandemic outbreak that made South African government leaders decide on a 21-day lockdown, that started Thursday midnight.”
Moody's analytical focus is on fundamental factors that will drive an issuer's long-term ability to meet debt payments, such as major economic downturns, a radical change in management strategy, or major regulatory developments that the South African government and the economy is facing currently.
South Africa is dedicated in rebuilding institutional strength as a foundation to turnaround the economy but the impact shows to be very deep, that makes the efforts placed not germinating to show positive results. South Africa has great hospitality for all investors and international workers to our nation and we will continue exhibiting those high standards and the other principles of world trade organization ad International Chamber of commerce.
While one of Moody's main analytical concentrations is on understanding the drivers of cash flow generation and, in particular, the predictability and sustainability of cash flow. Moody's will conduct a financial analysis to determine an issuer's cash flow resilience in the event of an economic downturn.
Today we can practically say, the predictability and sustainability of cash flow are dependent on the impact of Covid-19, and we will witness poor returns to almost all listed and unlisted investments, manufacturing, the global purchasing managers index plummeted in key manufacturing hubs such as China, Japan, Eurozone, Zambia, Ghana and South Africa. The problems are facing all of us and now corporate South Africa start to see that government is an important stakeholder. This is an opportunity for South Africa to unite and introduce stimulus packages to assist in the transformation of the economy.
Transformation of the South African economy will benefit institutional investors, expansion of the economy, additional Johannesburg Stock Exchange primary markets and Alternative Stock exchange listings. Quantitative easing is the solution for the recommended economic and institutional reforms for South Africa, and the debate must be opened to quickly come with solutions to restore the economy.
Moody's looks set to leave the outlook on the Government of South Africa's ratings at negative last changed in November 2019. Moody's decision to change the outlook to negative from stable reflected the material risk that the government will not succeed in arresting the deterioration of its finances through a revival in economic growth and fiscal consolidation measures.
Moody’s Analytics said, “The coronavirus is a serious mounting threat to the fragile Chinese and global economies. It is hard to handicap how broadly the virus will ultimately spread and how virulent it will be, but it has already become highly disruptive to China and increasingly to the rest of Asia. The U.S. will not be immune to its ill effects.” This gives Economist and Capital Markets Strategist an understanding that Moody’s Investors Services inputted the impact of the Coronavirus pandemic spread globally and they will surely not downgrade South Africa if they are consistent with their statements on the economic crisis and environmental impact affecting the global markets including South Africa.
The challenges the government faces are evident in the continued deterioration in South Africa's trend in growth and public debt burden, despite ongoing policy responses. South Africa needs quantitative easing as a solution to deal with the pre and post Apartheid which was political, deeply economical as inequality portrayed 25 years of democracy and social system to disadvantage the majority South African.
The challenges South Africa faces are best explained by the term of inequality that’s so deep, leading the black people who need to change their country to be one of the globally competitive nations trapped with economic means to cross the border to authentic democracy and economic freedom.
It’s unfortunate to highlight that the Covid-19 pandemic spread across South Africa has again portrayed how willing is the South African president to transform the nation and provide stimulus packages to all stakeholders but the established coronavirus impact fundraised about 14 billion, with great help from two philanthropists who committed 2 billion, one billion each, while on the other hand, no one from the black majority can match them, showing how strong and tense is South African inequality. The gross domestic product per capita will come out so disappointing if we can start analysing such probabilities on the two races.
South Africa needs a solid quantitative easing with enough stimulus packages to deal with the challenges of post-apartheid, affirmative action principles, impacts of recessions that collapsed black general dealers and other small businesses, the technical recession that we are experiencing year on year and currently the coronavirus pandemic spread that will collapse our listed companies and small businesses for all people combined.
Moody’s came to a realisation in their last assessment to South Africa 2019 November: “While high unemployment, income inequality and the social and political challenges they imply for policymakers are long-standing features in South Africa, the obstacles that they pose to the government's plans to raise potential growth and contain fiscal deficits are proving more severe than expected a year ago.”
The ruling party might have contributed in making some mistakes mainly the past 10 years, that makes us witness the state capture commissions that also has bias outcomes, showing lack of proper establishment’s ability of commissions and shortsighted guidelines or terms of reference, leading to PIC Commission, not to handle the forensic examination for a much longer period and assessing much, small asset managers. South Africa lacks a common identity and the country is struggling to realise this national vision and mission, while another nation has went pass race, we are trapped on race and it’s regarded dividing when we seek solutions to solve these intractable problems. We need quantitative easing to level the playing game, it’s good when basketball players are gifted with the same heights, that makes the NBA games interesting.
The government has promoted a number of initiatives in response to these long-diagnosed issues. However, its ability to implement those initiatives in a way which generates broadly-based sustainable growth has faced obstacles in part from outstanding vested interests, in part from the social and political challenge of imposing measures that are initially likely to be detrimental for parts of the population.
Our response to the recommendations and what is not yet done since the disaster of apartheid in South Africa is using monetary policy strategies such as quantitative easing to provide enough stimulus package to redress and completely repair the untreated cripples of the pre and post-apartheid. This demands South Africa to have an economic crisis assessment and come with solutions, using all their policies in place including the continuously unwanted debate of Land reforms.
For instance, while the new mining charter has finally been introduced, it is unlikely to boost the sector's investment, with regulatory uncertainty persisting amid ongoing appeals against some provisions of the charter. The government has also introduced multiple initiatives in the labour market including the Youth Employment Service programme, but none on a scale likely to materially increase employment.
Other politically and socially sensitive reforms such as land reform have seen slow progress given the government's need to balance the social and political objective of allowing land restitution, including through expropriation without compensation, and the economic objective of preserving investor confidence. We are naturally gifted with critical and analytical thinking traits as a nation and we will have reflective and mindfulness solutions on the South African land reform implementation
The vision of Moody’s investors Services is to be the global leader in solving critical business problems and we believe that Moody’s will assess the economic impact of South Africa, with the critical and analytical thinking traits to enable them to solve or assist in solving the South African economic problem. While their values are Customer focus in serving their institutional investors, excellence, open mindset, and teamwork, that we believe it will make them to work or continue to work in assisting South Africa in writing a good story for this unequal society, and exhibit their excellence in an architectural design for an economy inspired by economic development and Gross national happiness.
Miyelani Mkhabela is a Director and Economic Strategist for Antswisa Transaction Advisory Services contactable at: antswisa@gmail.com | +27 61 4433 199 | Twitter:@miyelani_hei