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<\/a><\/p>\nMoody\u2019s cut its assessment of South Africa\u2019s debt to sub-investment grade on Friday (27 March),\u00a0saying unreliable electricity supply, persistent weak business confidence and investment, and long-standing structural labor market rigidities continue to constrain economic growth.<\/p>\n
According to Moody\u2019s the downgrade comes as South Africa is beaten down by unreliable electricity supply, with persistently weak business environment and low levels of investment.<\/p>\n
The country also has a long-standing labour issue, and low levels of flexibility on policy. Effectively, South Africa has a lot of problems, and government isn\u2019t (and can\u2019t) move quickly enough to solve them.<\/p>\n
While the coronavirus pandemic is mentioned in the report, the crux of the rating downgrade lies in the country\u2019s other fundamentals.<\/p>\n
\u201cThe decision by Moody\u2019s could not have come at a worse time. South Africa, like many other countries, is seized with containing the outbreak of the coronavirus (Covid-19),” said Treasury.<\/p>\n
\u201cThe impact of Covid-19 is felt across various sectors of the economy including the financial markets which experienced a significant sell-off in equities, bonds and exchange rates as investors retreated to safe haven securities amid the uncertainty.<\/p>\n
The sovereign downgrade will further add to the prevailing financial market stress. These two events will truly test South African financial markets, it said.<\/p>\n
\u201cSouth Africa\u2019s deep, stable financial sector and robust macroeconomic policy framework have always been flagged as a credit strength, including the South African Reserve Bank\u2019s demonstration of a good track record in implementing credible and effective monetary policy and preserving financial stability.\u201d<\/p>\n
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