The Independent Municipal and Allied Trade Union (IMATU) is deeply concerned by Standard & Poor’s (S&P) decision to downgrade South Africa’s sovereign credit rating yesterday afternoon, following an emergency meeting over the weekend. Fellow global ratings agency Moody’s, announced this morning that it was placing South Africa on review for a downgrade.
S&P reduced South Africa’s credit rating one notch to BB+ from BBB-, placing the country’s bonds in ‘speculative grade’, commonly called “junk status”. In simplistic terms, a ratings downgrade leads to lower access to credit and it costs more for South Africa to borrow the money it needs to finance its social support commitments relating to health, housing and education.
“While IMATU prides itself on focussing on the needs of our members in the local government sector and maintaining a politically independent approach to socio-economic situations, all South Africans will be affected by this change in the country’s investment status. IMATU believes that the downgrade will directly undermine the goals of our National Development Plan, to eradicate poverty, inequality and build a more inclusive economy. Our concerns are rooted in the direct effects a downgrade will have on higher levels of unemployment and increases in the prices of food and fuel,” explained IMATU General Secretary, Johan Koen.
S&P attributed its decision to fiscal and political instability, stating “the downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the Finance Minister, have put policy continuity at risk…This has increased the likelihood that economic growth and fiscal outcomes could suffer.”
“The precarious nature of our present economic outlook and the potential harm that will be experienced by our members, fellow South Africans and, most unfortunately, the vulnerable sectors of our society, necessitates that IMATU becomes involved. We are calling on our Country’s executive to provide decisive leadership, clear policy positions and political stability in a bid to mitigate the damage that has already been done,” concluded Koen.