Treasury official: ‘Ratings agencies were a bit unfair to us’

Mampho Modise woke up in the early hours of March 31 – as is to be expected for the mother of new born child. Less expected, however, were the 20 or so missed calls on her phone from Johannesburg, London, New York and Japan.

The finance minister, Pravin Gordhan, had just been sacked and Modise, as chief director of strategy and risk management at the national treasury, was the first port of call for nervous investors.

Shortly after Gordhan was appointed in a bid to calm the markets in December 2015, he asked the team to focus on one goal for the next 18 months. The decision was to preserve the country’s credit rating and avoid a downgrade, said Modise speaking as part of a panel discussion hosted by Webber Wentzel on Wednesday afternoon.

Her job entailed constant engagement with the various ratings agencies and providing them with the most updated information at all times.

“I was speaking more to the ratings agencies than I was speaking to my mother,” said Modise. “It worked well, we were hanging on by a thread but we managed to do it.”


When Modise arrived at the office following the Cabinet reshuffle, the work did not stop. First, Modise had to speak with the ratings agencies who wanted more information. No sooner had she bid farewell to Gordhan, she was required to compile a briefing note for the new minister, Malusi Gigaba.

Days later, Standard & Poor’s took an unscheduled decision to downgrade South Africa’s foreign debt rating to junk. Shortly after, Fitch junked both its foreign and local debt ratings for the country.

“The decision they made was a bit unfair for us, not giving us enough time to see what we will do,” said Modise. “Basically, they are saying we will approve nuclear and stop ipps [independent power producers]. They are very specific on the things they think we are going to do. Moody’s [who has placed South Africa on review] has at least given it some time to see if South Africa is going to do what it said it will do.”

Also speaking on the panel, Iraj Abedian, economist and chief executive of Pan-African Investment and Research Services, said a downgrade is not as automatic as it’s made out to be adding one mustn’t diminish the role of the jockey in any race.

“When Pravin Gordhan came back – the magic of his potion since then was to create a show of public and private union to counter the technical argument ratings agencies were making that we were fit for downgrade,” Abedian said noting no global comparators had such a show of force.

Abedian said while concerns may revolve around nuclear, there is much lower hanging fruit like the shortfall in the state-owned enterprises that require recapitalisation of some R80-billion which is not budgeted for.

“Those billions will come in and in 12 or 14 months the balance sheets will be hollowed out again,” he said. “Ratings agency didn’t have to wait – they have seen this movie again and again.”

Abedian noted there was also added pressure on ratings agencies to act timeously after 2007 when they first waited for banks to go belly-up and were subsequently lambasted for neglecting their fiduciary duty.

Abedian said the South African economy was resilient and could bounce back in three years. However, it would require hard work and a “hyperactive” private sector. “It is a national imperative that we work together … We cannot be fatalistic and be armchair analysts while Rome is burning.”

As government “We need to do what we said we are going to do,” said Modise. “That is the only thing that is going to reverse the process … it’s very clear: we need to take the budget as it is and implement what it says in the budget.”

Technocrats, Modise said, could do a great deal to help the situation by presenting information and factual arguments to the politicians.

Asked from an audience member if treasury officials would leave following the removal of Gordhan, Modise said staff were committed to steering the ship. “We will be here as long as we see we need to do so and ensure treasury remains the strong institution that it is.

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