Ratings firms keeping a close eye on SA politics as junk status looms
The global ratings agency most optimistic about South Africa is warning that political tensions and a weak economic climate is putting the country’s credit rating at risk.
Moody’s on Wednesday (1 February) joined other global ratings firm S&P Global in warning South Africa about its political climate, which is hampering the country’s ability to make the necessary policy changes to spur growth.
“Political tensions impeded key structural reforms such as comprehensive reforms of state-owned enterprises which are yet to take place and hampered growth, another key credit challenge,” the group said.
Late January, S&P warned that slower global growth and domestic weaknesses have dragged down South Africa’s economy, which has disappointed since 2014.
It noted that the rand’s exchange rate has been volatile, slumping against major currencies, with its relative global share in foreign exchange trading declining over the past three years.
Meanwhile, the country’s fiscal financing needs-a key rating driver behind our long-term local currency rating have mounted.
Despite South Africa’s resilience to this downward trend, it is on the edge, with S&P holding the country at a BBB- rating (one notch above junk) with a negative outlook.
Moody’s has the country at BBB (two notches above junk), while the other major ratings firm, Fitch, is at the same level as S&P.
All eyes will be on finance minister Pravin Gordhan as he prepares to deliver the country’s budget speech later this month, which will give ratings firms a better idea of how government plans to continue trying to turn things around.
Read: This is what a major ratings firm thinks about South Africa’s prospects for 2017
Loading ...