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Is South Africa on the brink of default? No, says Ramaphosa economic advisor

South Africa's economy is a piece of junk. Bruce Whitfield interviews Trudi Makhaya, the Presidential economic advisor.

Late on Friday, Moody’s announced its latest downgrade of South Africa’s credit rating by one notch (to BA2).

It’s also maintaining the country’s “negative outlook”, suggesting further downgrades are probably imminent.

Fitch also downgraded South Africa (from BB to BB-), also with a negative outlook.

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Moody’s acknowledges the government’s plans to improve the country’s fiscal position but says that “implementation risks” have risen.

Fitch highlighted rising government debt, weak growth, and high inequality for its decision.

Both rating agencies mentioned the effect of the lockdown on the country’s fiscal strength as a reason for their downgrades of South Africa.

S&P Global is keeping its ratings for South Africa at BB- (foreign currency) and BB (rand), both with a stable outlook.

Not since 1994 have the country's "rand" ratings been this low.

All the progress achieved over the past 25 years (our ratings peaked in 2006 at A+ with S&P) has now been wiped out.

In reaction to the announcements, Finance Minister Tito Mboweni repeated a familiar refrain, that there’s a burning need for the government to implement structural reforms to avoid further downgrades.

Mboweni begged South Africans to adhere to Covid-19 regulations such as mask-wearing to avoid a second wave of infections, which would abruptly end the nascent economic recovery.

The Money Show’s Bruce Whitfield interviewed Trudi Makhaya, economic advisor to President Cyril Ramaphosa.

I don’t think this is an indictment of the President’s plan…
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

Is South Africa on the brink of default? … We don’t suffer issues of countries such as Venezuela… There hasn’t bee a spike [in the bond yield] … We’re not on the brink of default.
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

They’re cautioning us… we need to deliver… We’re embarking on reforms… Our fundamentals aren’t at the point of doom and gloom.
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

We’re going to remove barriers to investment… irritating red tape that businesses encounter… Government wants to work with the private sector…
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

We’re a mining country… We need the exploration dollars…
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

The pace of reform must be accelerated…
Trudi Makhaya, economic advisor - President Cyril Ramaphosa

Listen to the interview in the audio below.

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