Downgrades, elections and surviving the Zuma era. There's still hope

Image source: Gallo/Getty

“We must recognise that we cannot continue on the path we are on and that we have to address the issues,” said Kyle Mandy PwC tax technical leader, at a PwC post-Budget panel discussion. “There is a strong sense that we are heading into a new direction and hopefully we will see the implementation of these after the election.”

Fixing Sars

He adds that the appointment of a new South African Revenue Service (Sars) commissioner is the first step and an important start. “It will still take a long time to rebuild Sars and get the right skills back in again. It will take a minimum of three years to get back to where we were.”

A strong revenue service is very important in the event of a downgrade. “If there is a downgrade and we want to build recovery, then Sars has to work properly and there must be policy certainty so that we do not slip into further decline,” said Mary Vilakazi, chief operations officer, FirstRand Limited.

In the event of a downgrade

“A downgrade, if implemented, could be a turning point and a period of encouragement, rather than seeing it as not moving forward,” she said, adding that banks will be able to sustain the knock of a downgrade, but cost of borrowing will go up.

Mandy believes we will be on negative watch from March, but not downgraded to junk just yet. “There is a sense that everything is hanging till the election. Hopeful the real budget will be the mini budget in October.”

The panel agreed that a downgrade is not impossible to come back from. It takes two to 14 years to turnaround a country. Malaysia took two years, but it depends on the political will to do it.

The axis of elections

However, a proper economic meltdown will benefit the socialists and radicals. “The EFF will get stronger, and even the BLF,” said political analyst, Max du Preez.

He believes that Ramaphosa’s opponents have underestimated him for a long time and he needs more credit and time.

Du Preez said that the president’s own party is the enemy. He needs 60% of the vote in the upcoming elections so he can stop looking over his shoulder and avoid the dreaded recall in 2020. “A 55% vote could see him consolidate his power. He has to date not flexed his muscles publicly. He also has the difficult task of turning around his party, with the EFF having a massive impact on ANC thinking. A 12% EFF will have an impact on the government and will see a further descent into populism.”

The glimmer of hope

There is hope. With many private sector companies that remain focused on and invested in the country for the long term. But our problems are very much here and now. We are on an unsustainable path of borrowing given our inability to pay back,” said Phuti Mahanyele executive chairman, Sigma Capital.

“We have been through a decade of public and private sector distrust. We need all sectors of society to work together. The private sector can create jobs, it is up to government to create a conducive environment for that. Government is not an employer or job creator,” said Vilikazi.

Du Preez believes that South Africa has survived the Zuma era and State Capture and can survive anything. “History shows that open societies never become failed society. Civil society instigated this and saved the country. It is our new culture and we will continue with it. The future can be very exciting if we can get over this hump.”