Cannon Asset Managers CEO on how SA can recover from Moody's downgrade

Moody's recent downgrade of South Africa's sovereign credit rating to junk status has sent shockwaves through the country, but according to Adrian Saville, Chief Executive of Cannon Asset Managers, this move was not entirely unexpected. In a recent interview with CNBC Africa, Saville shared his insights on how South Africa can recover from this downgrade and what steps need to be taken to restore its credit rating status and foster economic growth. Saville highlighted the importance of addressing the country's fiscal challenges and implementing necessary reforms to navigate the current economic crisis. Saville emphasized that while the downgrade was not a surprise to many in the financial markets, the timing of the decision was unfortunate. He likened the situation to blaming the mirror for a bad haircut, noting that South Africa had found itself in a fiscal straight jacket that it must now work to overcome. Saville stressed the need for tenacity and determination in implementing the required reforms, citing examples of countries like South Korea, which managed to regain investment grade status within nine months after a downgrade. One of the key areas that South Africa needs to focus on, according to Saville, is addressing the state-owned enterprises' operational and financial efficiency, as well as tackling corruption. He pointed out that the country's spending pattern has been geared towards consumption rather than investment, which has hindered economic growth. Saville also highlighted the importance of investing in infrastructure and improving service delivery, especially in light of the ongoing COVID-19 crisis. When discussing the role of rating agencies, Saville noted that their assessments are based on the country's behavior and economic fundamentals. He emphasized that complying with the agencies' recommendations is not about appeasing them, but rather about building a strong economy. Saville stated that South Africa's response to the COVID-19 crisis will shed light on its capacity to address key economic and social challenges, such as healthcare access and service delivery. In conclusion, Saville emphasized that South Africa must focus on both addressing the immediate health crisis posed by COVID-19 and implementing necessary economic reforms to restore its credit rating status. He highlighted the interconnected nature of these challenges, noting that by improving healthcare access and service delivery, the country can also address key concerns raised by rating agencies and pave the way for sustained economic growth.