As South Africa entered a twenty-one day, national lockdown to combat the spread of the Coronavirus, the country entered a time of unprecedented firsts at the scale of another historical first moment when, for example, Nelson Mandela walked out of the Victor Verster prison – as a free man.
For the first time in our democracy, government had to invoke the National Disaster Act, for the first time certain citizen rights had to be limited in order to enable social distancing so as to curtail the spread of a virus, for the first time a president of the Democratic Republic of South Africa donned the camouflage uniform of the South African National Defence Force, in his capacity as Commander in Chief, as he addressed soldiers about to embark on a mission of mercy to safeguard our society from an invisible enemy. This has truly been a time of firsts. All actions taken by government in a time of disaster is still guided by, and in adherence to the supreme law of the land – The Constitution of the Republic of South Africa.
At this time of national mobilisation, where the frontline of the fight against the virus is potentially everywhere, Brand South Africa notes with concern the announcement by Moody’s Investors Service. Essentially Moody’s downgraded South Africa’s long-term foreign-currency and local-currency issuer ratings to Ba1 from Baa3. According to Moody’s, the outlook remains negative.
“The key driver behind the rating downgrade to Ba1 is the continuing deterioration in fiscal strength and structurally very weak growth, which Moody’s does not expect current policy settings to address effectively. Both outcomes speak to weaker economic and fiscal policy effectiveness than Moody’s previously assumed,” Moody’s says.
Moody’s decision comes amid a global crisis to combat the coronavirus (COVID-19) outbreak. As a country, South Africa is firmly focused on containing the outbreak of COVID-19. The epidemic is adversely impacting different sectors of our economy, including the financial markets which experienced a significant sell-off in equities, bonds and exchange rates as investors retreated to safe-haven securities amid the uncertainty.
Brand South Africa notes furthermore, that while the downgrade will have an impact on a country and an economy in the midst of dealing with the local manifestation of a global pandemic, that we echo the words of the Minister of Finance.
“It is with a heavy heart to note that all three major credit ratings agencies currently rate South Africa at sub-investment grade. However, every crisis presents an opportunity. The opportunity we have today is to unite and work together to address our challenges. We as a people have overcome insurmountable challenges in the past and we can still overcome. We shall rise. We have to rise. We owe it to ourselves,” said Tito Mboweni, South African Minister of Finance.
With this in mind the moment of crisis faced by the country is a call to action. It means, as we all hope, that by the time the COVID-19 pandemic has subsided – with minimal South African impact, the South African journey of development, transformation, and internal entrepreneurial development will be intensified.
Already, in the years before the pandemic, global GDP was waning, global trade slowing down, and global Foreign Direct Investment trends were all in a downward trajectory. Against these global trends, and through interventions such as the annual Investment Conference, and economic reforms, the flow of Foreign Direct Investment into South Africa increased. This background is critical seeing that, as Moody’s announced its investment grade decision on South Africa, it is widely acknowledged that global markets are under siege, and the prognosis of the global economic outlook – as major economies went into lockdown, is to put it mildly – grim. This means that as South Africa grapples with both the pandemic, and its economic impact, this crisis is a loud and clear call to action for renewed creativity, and resilience to rebuild society and the economy in the medium- to long term.
It is with this in mind that, “We wish to reiterate our commitment to building the country’s brand reputation, to improve its global competitiveness. When the country exits from the COVID-19 pandemic the competitive advantages, strong infrastructure, and positioning as member of the African Continental Free Trade Area, G20, BRICS, and a host of critical global multilateral institutions will enable the country to strike new relationships, and find new opportunities to recover lost ground due to the credit rating downgrade and COVID-19 pandemic. As Brand South Africa, we urge our people to continue to drive efforts to fight against this invisible enemy, coronavirus. The country is not alone in fighting this pandemic, while it is still too soon to tell what the extent of the long-term impact will be on both the global and our national economy, the recent interventions implemented by both government and business to protect the economy and citizens will go a long way in cushioning our economy,”said Dr Petrus De Kock, Brand South Africa Research General Manager.
“We reiterate President Cyril Ramaphosa’s call, that the cost of not acting now would be far greater. We must prioritise the lives and livelihoods of our people above all else and will use all of the measures that are within our power to protect them from the economic consequences of this pandemic, he added.