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Thanks to allAfrica.com, this Leo has learnt that South Africa has taken a hit on its economic outlook with a downgrade by the rating agency, Fitch. The agency's press release states: "Fitch Ratings has revised the Outlook on South Africa to Negative from Stable and affirmed its Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB' and 'BBB+', respectively. The issue ratings on the senior unsecured foreign and local currency bonds have also been affirmed at 'BBB' and 'BBB+', respectively." [Don't they just look like A-level results?]
In summary, this Leo understands that South Africa's rising public indebtedness and social issues were the main reasons for this downgrade. Fitch however ended with an optimistic note that it expects South Africa to address its public deficit, reduce inflation, and continue with its levels of trade. The country's medium-term growth rate potential is said to be around the 3.0% to 3.5% mark.
To get an upgrade, the South African Chamber of Commerce (SACCI) advises the South African Government against any attempts to weaken the intellectual property (IP) regime.
Here is what SACCI had to say:
"..Considering the risks identified by Fitch, South Africa has six months to ensure that the outlook and ratings improve by ensuring:
- Production in the platinum sector picks up significantly by finalising the latest wage agreement. [on which there is breaking news]
- The government debt trajectory remains downward by cutting any unnecessary consumption expenditure.
- Investor confidence is strengthened by amending policies that will otherwise weaken property rights (e.g. Intellectual Property Policy, Private Security Bill, Investment Bill)."
Commentary
Afro-IP has monitored IP policy developments in South Africa over the last 12 months or so, e.g. here, here, here, and here. Last May, Caroline Ncube reported that the country's IP policy is nowhere in sight; this currently remains the case according to this republication by infojustice.org. This Leo commends SACCI for standing up for IP - though he couldn't resist saying that he didn't find any mention of IP in Fitch's statement. It may well be that Fitch took IP into account, but this Leo has no clue on how they do their thing.
The patent system seems to be the main IP right in the firing line in South Africa (perhaps, in all African countries) due to the often emotive access to medicine debate. Currently, this Leo understands that South Africa (again, like many other African countries) appears to offer patent protection with minimal hassle, and is still known as the hub for investors including those looking to protect their IP rights on the continent. Furthermore, a simple look around, online, tells us that South Africa is neither doing that bad with their IP office nor in seeking to protect and/or enforce the rights of trade mark (e.g. here) and copyright holders (e.g. here and here) [Copyright might be the next battleground for civil society groups]
Bearing in mind the prominence of the knowledge economy, IP rights monetisation, and the existence of international obligations relevant to IP, it may be worthwhile for agencies like Fitch to explicitly give IP the required backing - if they aren't already doing so. This might help reduce the cynical views or negativity about IP. Indeed, calibrating the rights of IP owners and others/public is difficult, and will remain so due to its dynamic nature.
To be fair, South Africa shouldn't be strongly criticised if it's attempting to tackle what Max Planck Institute might see as a homegrown problem. The way the country approaches it is a different matter. In any event, time will tell if or how this news would impact on South Africa's grand plan in the area of access to medicine. Since the country scored OK in this year's Doing Business Report, the government may well want to continue with the status quo to see if Fitch would change its mind - as SACCI hopes.
To be fair, South Africa shouldn't be strongly criticised if it's attempting to tackle what Max Planck Institute might see as a homegrown problem. The way the country approaches it is a different matter. In any event, time will tell if or how this news would impact on South Africa's grand plan in the area of access to medicine. Since the country scored OK in this year's Doing Business Report, the government may well want to continue with the status quo to see if Fitch would change its mind - as SACCI hopes.
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Unfortunately, this Leo's economics study at A-levels didn't go that far to enable him dissect the above jargons. So, for those who would like to know the 'real' implications on South Africa, here are some sources for you:
What are the real effects of a downgrade? See here
Can credit rating agencies come under criticisms? Well, like everyone else, 'yes'; see here, here, and here
A summary of the UK's credit rating downgrade in 2013 and its impact is here
A 2011 report on the U.S credit rating downgrade and its global effects is here
South Africans may wish to see if this rating infographics (2011 - 2014) provide some comfort
