Mboweni warns of dark cloud over SA
FORMER SA Reserve Bank governor Tito Mboweni said yesterday that “a dark cloud, mist or fog is gathering upon us as a country” after two of the world’s credit ratings agencies slapped South Africa with poor reviews last Friday, raising the risk that the country might soon lose its investment grade status.
“We have just become one notch above junk status. We cannot afford to become junk status,” Mboweni, who is now an honorary professor, said in a speech at the graduation ceremony of the faculty of commerce, law and management at the University of Witwatersrand in Johannesburg.
He said South Africa urgently needed to adopt a “defence mechanism” to safeguard its investment-grade status. “The immediate defence mechanism is based on three pillars: a credible fiscal stance – we dare not deviate from the budget stance we adopted in October, please!”
Secondly, he said South Africa must reinforce central bank independence and finally, reinforce respect for all independent institutions.
In addition to this, Mboweni said, South Africa would also have to demonstrate that “we are serious about economic growth and taking serious steps to propel it”.
On Friday, Fitch downgraded its sovereign rating for South Africa to one level above the so-called junk-status, while Standard & Poor’s cut its outlook on the country to negative from stable. A junk rating would be a blow to South Africa, most especially since the country relies heavily on foreign flows to service its current account deficit.
Mboweni also criticised the government’s policy making, saying, “an exchange rate cannot be a proxy for industrial policy”. “In fact, policy conflicts in our government need to be sorted out. Better co-ordination and leadership is required,” he said.
Mboweni served as governor of the SA Reserve Bank from 1999 to 2009, and as the Minister of Labour in former President Nelson Mandela’s cabinet. He is also a member of the National Executive Committee of the ANC and serves as a non-executive director of the new Development Bank (Brics Bank). He joined Wits in August this year. – Staff Reporter