NEWS

The ANC Warns A Recession Could Be On The Way

But behind the scenes, ministers are mocking the ratings agencies.

09/04/2017 17:29 SAST | Updated 10/04/2017 06:41 SAST
Frennie Shivambu/Gallo Images/Getty Images

ANALYSIS

If you'd woken up from a week-long slumber on Sunday morning and turned to eNCA online, where an ANC briefing was being streamed, you'd be forgiven for thinking the party's reaction to two ratings agency downgrades was concerned, reserved, and cautious.

The ruling African National Congress (ANC) also believes we could be staring down a recession in the near future, and has called on South Africans to pull together to avoid it.

But that briefing, and what ANC members have been saying in the week since the downgrades, and the ANC's official response are worlds apart.

On Sunday, the ANC's subcommittee on economic transformation briefed the media on the party's discussion document on economic transformation, due to be discussed at its policy conference in June.

The committee's chairperson, Godongwana suggested that the ANC did not have a clear grasp of the consequences of the ratings downgrades.

"People in South Africa have never known junk status. The only time we came close [to junk status] was in 1985. People don't have experience of junk status. We need to pull together, particularly if we want to help the minister of finance [Malusi Gigaba]. If we want to help him we need to sing from the same book," said.

Godongwana even said the country could face a recession as a result thereof.

"Are we anticipating a recession? That's a possibility," he said.

Also on Sunday, while this concern was being expressed, the Sunday Times revealed that high ranking ANC members, including ministers had essentially laughed off the ratings downgrades.

To add further confusion to the mix, on Friday, the day that ratings agency Fitch also downgraded South Africa, the ANC Youth League (ANCYL) said the party welcomed the ratings downgrades.

"We are welcoming the junk status. When the economy rises again, it will be held by us," said Collins Maine, ANCYL chairperson.

Ratings agency S&P downgraded South Africa's sovereign credit rating to junk status on April 3, and Fitch followed suit last week.

According to the Sunday Times, Zuma's son, Edward, said the ratings agencies "did us a favour, really", on a WhatsApp group belonging to several of the president's inner circle.

Water and Sanitation Minister Nomvula Mokonyane said: "It's actually better Western investors will pull back and we have an opportunity to bring them back in our own terms, after we have consolidated our relations with Africa and Brics. We must rearrange our foreign debt repayments."

And South African Airways chairperson, Dudu Myeni reportedly said: "I concur cdes. Let the rand fall and rise and emerge with the masses."

Treasury's own response to the downgrades has been conservative, too, and also in stark contrast of what Zuma's inner circle thinks.

After the first downgrade, new finance minister Malusi Gigaba said: "Government has been, and will remain, committed to a measured fiscal consolidation that stabilises the rise in public debt ... South Africa is committed to a predictable and consistent policy framework, which responds to changing circumstances in a measured and transparent fashion."

Political analyst Aubrey Matshiqi told The Huffington Post South Africa that a faction of the ANC had seen the downgrades coming, and had been ramping up the rhetoric against the agencies in anticipation of this for some time.

For example, in January, the ANCYL called on government to ban ratings agency Moody's from entering the country.

The strategy, mainly employed by pro-Zuma lobbyists in the tripartite alliance, was to paint any action taken against Zuma for removing Pravin Gordhan from the finance ministry as a conspiracy of the West.

While the spin appears to have taken hold with Zuma allies, the rest of the world disagrees.

The rand came close to R14 to the Dollar when Gordhan was axed. On Sunday, the rand traded at R13,76. About R80 billion was wiped off of banking stocks in less than a week, according to the Sunday Times.

This week, Zuma faces even more opposition as the Economic Freedom Fighters, Democratic Alliance, Congress of the People, Inkhatha Freedom Party ope, IPF, ACDP and the UDM will march in Pretoria calling on Zuma to step down. This follows the country-wide marches against him which took place on Friday.

He also faces a vote of no confidence debate against him in Parliament on April 18.

The ANC's mixed rhetoric on the economy are no doubt a symptom of its internal divisions. City Press reported on Sunday that across the country, anti-Zuma lobbying is taking place.

If the reports are anything to go by, the ANC's mixed messaging is far from over.