South Africa’s Economic and Fiscal Quagmire: A Political and Insurrectionary Dilemma as Rating Agencies Downgrade the South African Economy and Minister of Finance Fired by the President Without any Tangible Reasons

Anis Mahomed Karodia, Sayed Rehman and Paresh Soni

International Business Research, 2016, vol. 9, issue 3, 175-196

Abstract: This narrative attempts to deal with the title of the paper in terms of the South Africa’s economic and fiscal quagmire and crisis. In no way is the paper all inclusive because, it cannot capture all of the subtle nuances that encompass this vexing issue, nearly two decades after the dawn and road to democracy, post 1994. The Finance Minister is in a no win situation and has to play the tune of his political masters. The Ministers mid-term review tabled to the nation in October, 2015 shows that he has to walk a very tight rope because of the current account, fiscal deficit and points to the reality that the business outlook is bleak. The reality question is, is it economic power or political power? The downgrade risks that the country faces on the part of rating agencies makes Minister Nene’s Job even more trickier and therefore, faces a near impossible balancing act’ to appease rating agencies. Can the Minister keep the credit agency wolves from the Treasury door? South Africa is in an economic and fiscal turmoil as it dips into savings to pay its monthly bills and therefore, reserve funds are being diverted into bureaucrats’ salaries. It is not only the question of the prolonged economic meltdown, but in reality it has to do with the mismanagement of the economy by the ruling government. The very high levels of corruption, cronyism, a mismatch in policy imperatives, the failure to action holistically the National Development Plan (NDP) and, a number of variables that have placed South Africa in this extreme quagmire, exacerbated by increasing unemployment, depressing poverty levels and rising inequality. The only solution is to deal decisively with corruption and to generate rapid growth by means of policy certainty. Against this background the paper will attempt to discuss these and other scenarios that confront South Africa.

Keywords: economy; fiscal; quagmire; political; insurrection; mismanagement; governance; budget; national development plan; deficits; downgrade; scenarios; debt; rating agencies (search for similar items in EconPapers)
Date: 2016
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