ANC Worries About S. Africa Economy Rather Than Junk Rating

  • Rating companies should assess policy outcomes, Mantashe says
  • Party to hold national policy conference in June 2017

South Africa’s ruling African National Congress takes policy decisions based on what it considers best for the economy rather than to try impress credit rating companies, the party Secretary-General Gwede Mantashe said.

“There’s one thing that we have agreed never to do, that’s for the ANC and its government to work to impress ratings agencies,” Mantashe, the party’s third in command, said in an interview Thursday at Bloomberg’s office in Johannesburg. “We should do the right thing and the ratings agencies must rate us on what we are doing.”

S&P Global Ratings and Fitch Ratings Ltd. left their assessments of South Africa’s creditworthiness unchanged at one level above junk in June, while saying the government must take decisive steps to bolster growth, quell policy uncertainty and end political turmoil. While the outlook for economic growth has improved marginally from six months ago, fraud charges against Finance Minister Pravin Gordhan, which were dropped after three weeks, and delays in passing new mining and anti-money laundering legislation have fueled perceptions of policy indecision.

The ANC is due to hold its national policy conference in June. The party will review and make recommendations on existing policy and also hear new proposals. This will be six months before its elective conference, where delegates will vote for a new party leader to replace President Jacob Zuma.

“When we talk policy, the concern will be slow growth, high unemployment and deepening poverty, growing inequality and then dealing with the factors underlying these four issues,” Mantashe said. “We’ll say to a government that is led by the ANC, please address these issues.”

After the 104-year-old ANC suffered its worst performance in an election during August’s local government vote, Fitch said there is a risk the party could turn to more populist measures, including breaching expenditure ceilings or “redistributive regulatory policies” that might undermine economic growth, to address rising voter dissatisfaction.

Officials from Moody’s Investors Service visited South Africa in September and will announce the outcome of their review on Nov. 25. S&P will release its decision on Dec. 2 and Fitch is due to visit the country next month. While the ANC is hopeful South Africa will avoid a downgrade to sub-investment grade in December, the party will be more worried about the issues that cause the ratings cut than junk status itself, Mantashe said.

By implementing policies that improve economic growth, projected to slow to 0.5 percent this year, and tackle the 27 percent unemployment rate, “the issues for ratings agencies will be addressed,” Mantashe said. “Then the ratings agencies will not be rating us on what we do to appease them, they will be rating us on what we do to get the economy right.”

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