South Africa could see its credit rating upgraded if it successfully implements structural reforms that would raise economic growth and stabilize the nation\u2019s debt burden, Moody\u2019s Investors Service said.<\/p>\n
Reforms to state-owned companies that reduce contingent liabilities would exert upward pressure on ratings, Lucie Villa, a vice president and senior credit officer who\u2019s the lead analyst for South Africa at Moody\u2019s, said in a research report Tuesday.<\/p>\n
Conversely, the assessment would be cut if the state doesn\u2019t stabilize debt and liabilities, she wrote.<\/p>\n
Ratings companies have flagged state firms\u2019 finances as a concern in recent years.<\/p>\n
Moody\u2019s is the only one of the three major credit-rating companies that still assesses South Africa\u2019s debt at investment grade.<\/p>\n
Optimism following President Cyril Ramaphosa\u2019s ascent to power since December after Jacob Zuma\u2019s corruption-plagued tenure of almost nine years has faded somewhat as structural reforms weren\u2019t implemented fast enough.<\/p>\n
Government guarantees to state companies are at more than R450 billion ($32 billion), according to data from the National Treasury.<\/p>\n
The state\u2019s exposure to this increased to 64.5%\u00a0in the past fiscal year from 54.4%\u00a0as companies drew on the guarantees.<\/p>\n
The economy is struggling to emerge from a first-half recession. Last year, a widening fiscal deficit and slower economic growth projections led S&P Global Ratings and Fitch Ratings Ltd to strip the country of its investment rating, sending yields skyrocketing and the rand weaker.<\/p>\n