National Treasury warned that the Moody’s rating downgrade with a negative outlook “indicates that the risk of further downgrades is still there”.
Treasury issued a late-night statement on Friday, after Moody’s announced that it had downgraded the country’s long-term foreign and local currency debt ratings one notch from Baa2 to Baa3, and gave it a negative outlook.
Earlier this year, following the Cabinet reshuffle where President Jacob Zuma replaced former Finance Minister Pravin Gordhan with former Home Affairs Minister Malusi Gigaba, the ratings agency placed South Africa on review for a downgrade. At the time both Fitch and S&P downgraded the foreign currency rating to junk status.
Democratic Alliance finance spokesperson David Maynier said the decision by Moody’s is a vote of no confidence in Finance Minister Malusi Gigaba and President Jacob Zuma.
“The decision by Moody’s highlights the fact that ‘political developments’ have had a negative effect on ‘institutional strength’, which ‘casts doubt over the strength of and sustainability of the recovery in growth and stabilisation of the debt-to-GDP ratio over the near term’,” he said, citing an earlier statement by Moody’s.
“The ratings action means our long-term local currency debt, which forms 88.2% of our R2.2trn net debt, now hovers dangerously at one notch above ‘junk status’, with a negative outlook, following ratings actions by the two most important ratings agencies, Moody’s and Standard & Poor’s.”
In response, the DA has written to the National Assembly Speaker Baleka Mbete, calling for a “snap debate” on measures to deal with the recession, ratings downgrades and mass unemployment in South Africa.
Meanwhile, Treasury said government calls on all South Africans, “including the private sector and trade unions to work even harder together to address these concerns”.
Treasury attempted to soothe rating agency fears, pledging that the “outcomes of the conferences of the African National Congress in June and December 2017 are not expected to translate to policy changes”.
“The publicly announced draft policies should cement concerns of policy deviations in the next five years,” it said.
“The urgent priority is reigniting confidence as well as reclaiming and maintaining the investment grade ratings.
“The Minister of Finance will ensure that the joint work of government, business, labour and the civil society continues at a faster pace.
“The commitment is on improving investor and consumer confidence through fast-tracking the implementation of the structural reforms on economic growth.
“Government would like to thank all stakeholders who participated in the rating review process and hope that such collaborations will continue,” said Treasury.