South African unemployment reached the highest level on record, official data showed on Monday, clouding the finance minister’s efforts to convince Standard and Poor’s and Fitch not to downgrade the country’s credit rating.
After a decision by Moody’s late on Friday to keep its rating on South Africa steady, Finance Minister Pravin Gordhan said he aimed to show its fellow agencies that the country was on the right economic track ahead of their own reviews in the coming weeks.
One of the world’s biggest metals producers, South Africa’s economy has been hit by a slide in commodities prices which came on top of wide spread labour strife in the mining industry.
The country’s rand currency initially rose on Monday in reaction to the ratings news, but sank sharply after the statistics agency revealed unemployment had risen to 26.7 percent of the labour force in the first quarter – the highest level since the survey of households began in 2008.
Gordhan himself warned against complacency after Moody’s appeared to give Africa’s most industrialised economy some breathing space.
“We developed a common intent among labour, business and government that we don’t want to be downgraded and that we have many positives to say about ourselves,” Gordhan told reporters at a public finance management conference in Johannesburg.
“We can’t be positive. All we can do is work as hard as we can to convince people out there that we are a country that is capable of solving its problems,” he said.
President Jacob Zuma is scheduled to meet with business and labour leaders later on Monday. The wobbly economy has raised the stakes for local elections on Aug. 3 which analysts say will be the sternest political test his ruling African National Congress has faced since coming to power in 1994.
Gordhan plans to hold meetings with Fitch and S&P in the next couple of weeks after Moody’s had said the country was “likely approaching a turning point after several years of falling growth.”
Moody’s left its rating of South Africa’s debt at Baa2, two levels above sub-investment grade, but assigned a negative outlook, citing risks to implementation of structural and fiscal reforms.
Hastily reappointed as finance minister in December after Zuma rattled investor confidence by inexplicably replacing his predecessor with a little known politician, Gordhan warned that a global downturn meant South Africa was on its own in tacking its economic woes.
“We need to find new and innovative ways to search for new engines of growth, to find new ways of igniting growth and creating the jobs that our people desperately require,” he said.
The Treasury in February forecast tepid growth for Africa’s most industrialised economy of just 0.9 percent in 2016 from a previous forecast of 1.7 percent and compared with estimated growth of 1.3 percent in 2015.
(Additional reporting by Mfuneko Toyana and Tanisha Heiberg; Editing by James Macharia and Toby Chopra)