Rating agency Moody’s downgrading of South Africa’s credit rating outlook was wrong, Deputy President Kgalema Motlanthe said on Friday.
“We respectfully disagree with Moody’s statement and the interpretation drawn from the dynamic nature of our political environment,” he said at a presentation at the Gordon Institute of Business Science in Johannesburg.
“[Moody’s downgrade] demonstrates the superficial way in which world rating agencies tend to conduct their assessments.”
Last week, Moody’s changed its credit rating outlook for South Africa’s economy from stable to negative.
Motlanthe said this was done even though South African banks had avoided the crisis thanks to measures including the introduction of the National Credit Act.
He said Moody’s revealed a lack of understanding of the approach taken by government to deal with the financial crisis.
This included working with business and organised labour to try to avoid retrenchments and placing jobs at the centre of economic recovery.
Moody’s said last week it was concerned South African politicians would not be able to stick to strict fiscal policies as this could be undermined by pressure from the ANC and labour.
Sticking to commitments
The agency said the ANC’s “unwillingness to definitively reject demands from certain segments of the political spectrum for more activist policy interventions was harmful to South Africa’s economic prospects”.
Motlanthe said Moody’s decision was unexpected as it came shortly after Finance Minister Pravin Gordhan delivered his medium term budget policy statement in which government reaffirmed its commitment to sound macroeconomic policies.
It also committed to sticking to a sustainable fiscal path by keeping increases in government spending to around 2.3% and undertaking to cut spending on non-core items.
Motlanthe said the ANC supported government policy and the medium-term budget policy statement.
“While there may be debate in the ANC there is a high level of discipline in government and we have proven over time that we stick to our commitments.”
Motlanthe took a stab at rating agencies in general.
“Ironically, the rating mechanism failed to forewarn the world about the potential of an ensuing eurozone debt crisis, including the crisis in Greece, which has prompted the European Commission to call for the regulation of rating agencies themselves,” he said. — Sapa