The South African government needs to rebuild trust between itself and the business community following last month’s shock cabinet reshuffle that resulted in two rating agencies downgrading the country’s sovereign credit rating.
Banking Association of South Africa (Basa) managing director Cas Coovadia said South Africa required leadership, which acknowledged that the country was in a crisis and an end to “radical rhetoric”.
“As chief executives we worked together with government to avoid a downgrade, and all that was brought to nought in one day. The government needs to say we will rebuild trust with business instead of the anti-business rhetoric. It does not help,” said Coovadia.
“When we talk about radical economic transformation without explaining what it means, it does not help.”
Coovadia was speaking on the sidelines of the World Economic Forum on Africa in Durban, on the state of the country’s economy and radical economic transformation through which the government plans to build a more equitable society.
S&P Global and Fitch ratings agencies downgraded the country’s ratings, citing heightened political tensions and increased policy uncertainty as the main reasons for the downgrades.
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The sovereign credit-rating saw seven of the domestic banks being downgraded to sub-investment grade. It also resulted in a sell-off of bank shares at the time and a drop in banks’ market capitalisation.
Basa said last month that the reshuffle had put South Africa into turmoil, at a time the country was trying to come together to address the problems.
It said the reshuffle was not in the best interests of the country as it undermined significant progress made in the past 18 months towards building confidence in the country.
Basa was a part of the joint initiative including business, labour and government spearheaded by former finance minister Pravin Gordhan, which worked towards avoiding a downgrade last year. Gordhan was replaced by Malusi Gigaba in the cabinet reshuffle.
The Reserve Bank said in its Financial Stability Review this week that the country was at risk of further downgrades to its credit ratings, which may weaken the currency and lead to higher borrowing costs.