This has been the year when awareness of the credit ratings industry entered the mainstream in South African popular culture. Unfortunately, it took a triple sovereign ratings downgrade for this to happen. Junk status has become the term of the day, bandied about in everyday conversations. But when it comes to understanding the real impact of the downgrades by Standard & Poor’s and Fitch and the ever slightly less disastrous downgrades by Moody’s, the banking industry has been the first port of call. The downgrades reflect a loss of confidence in South Africa’s leaders.
When Moody’s placed the country on review for downgrade in April this year, it did so to determine “whether the ongoing tensions within the ANC weakens the credibility and effectiveness of South Africa’s policymaking, the effectiveness and independence of the public service and ultimately the strength of the country’s institutions”. They subsequently proceeded to downgrade our sovereign bonds, confirming that they believe this is indeed the case. The debt of our major banks soon followed suit, as is usual after a sovereign debt downgrade. As far as we are concerned, this was no real reflection on the soundness of South Africa’s banks, but more of a procedural formality due to the government debt securities held as part of our liquid assets requirement. The world-leading quality of our banking institutions, their sustainability, their management excellence and the good customer service they offer is constantly reinforced in international surveys. The World Economic Forum and the Lafferty Group, rated five South African banks in the top seven in the world in their annual Global Bank Quality Benchmark.
The downgrades, though, come with grim ramifications for our local bond market as they cause South Africa to be removed from global indexes. If all three agencies downgrade us to sub-investment grade, the sell-off could amount to US$17-billion (or R221-billion at approximately R13 to the dollar).
In the absence of clear political leadership and policy certainty, we remain convinced that it is incumbent for business, labour and civil society to work jointly in the national interest.
Furthermore, in the absence of policy leadership, confidence wanes and investment stagnates, at home and abroad. This has pushed the South African economy into recession. Our growing debt burden will limit our fiscal ability to alleviate the effects of the slowdown and the poor will suffer most.
It thus becomes crucial for the private sector to build solidarity, to share strategic insights and to share these with government in the interests of stabilising policy, growing confidence and encouraging investment.
The other question of national importance enjoying prominence in news and social media is the emotive issue of land. Most of this issue of Banker SA is dedicated to looking at this through various lenses.
One of the issues around land is access to housing. Principle to this challenge, in the banking context, is improving the affordability of housing. Last year, BASA signed a memorandum of understanding with the Department of Human Settlements, which followed the Social Contract for Rapid Housing Delivery, a framework for partnerships and targeted resource mobilisation. The goal is to work together to provide 1.5 million housing opportunities, to eradicate the backlog of title deeds, to develop this commercially viable and sustainable market segment and to accelerate the delivery of affordable housing. As an effective, respected business sector, we are doing what we can to share our expertise and to build alliances to bring about change in society. We will continue to do so at every opportunity.
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