(Port Elizabeth) – With Moody’s expected to follow ratings agencies S&P and Fitch in downgrading South Africa’s credit rating within weeks, economic analyst Dr Iraj Abedian has warned that the country could soon see the full impact of the change from a split rating.
Addressing business leaders at the NMMU Business School in Port Elizabeth this week (May 10), where he is a visiting professor of economics, Abedian called on the audience to make it their collective “national responsibility” to avoid further ratings downgrades.
“This is too important an issue to keep quiet about. Business, ordinary citizens and students must talk about it and make their voices heard in a non-violent way,” said Abedian.
In a hard-hitting talk on the risks and opportunities for Africa in the context of prevailing global uncertainty, Abedian said the South African economy was afflicted by structural blockages and rising political and policy uncertainty.
“Our politicians have neglected the economy and failed to put clear and coordinated policies, and the capacity to implement them, in place,” he said.
Describing the ANC government’s dominance as “constructive” during its first 15 years of rule, Abedian said in-fighting had undermined its ideological consistency and political unity and led to neglect of the economy and the misallocation of resources.
“This leads to a loss of confidence among the poor and among potential investors, who will follow the ‘when in doubt, sit it out’ rule.”
Although the rand is currently among the top four most volatile emerging market currencies, he said, South Africa was just one of many countries dealing with lacklustre growth and major structural imbalances against a backdrop of global systemic instability and volatility.
Abedian outlined what he called the top four “structural fault lines” in the global system, including a lack of ethical leadership, unsustainably high income inequality, rising indebtedness on a personal and global level, and technological disruption causing a disconnect between the skills base and the economy, leading to unemployment and unemployability of the youth.
“Technological change explains the deteriorating labour market prospects, while the lifespan of listed business entities is decreasing to matter of years in this era of ‘creative destruction’.”
However, he said all was not gloom and doom and that, to succeed, business leaders needed to adapt to this global systemic disorder and learn to take a new approach to business within this transitional climate.
“In Africa, there are massive opportunities for productive investment in infrastructure, where we spend less than the global average of 3.5% of GDP annually. By 2035, more Africans will live in cities than in rural areas, so we need to meet this growing demand.”
Holding 60% of the world’s potentially available arable land, the continent was well positioned to capitalise on agriculture, agro-processing and all the related services, but needed to invest in globally competitive production technologies, he said.
Source: Port Elizabeth – MyPR.
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