South Africa is paying more to borrow than its emerging-market peers because the slow pace of reforms is dampening economic growth, according to Moody\u2019s Ratings. <\/p>\n\n\n\n
\u201cWe think these are the issues that are weighing on the cost of debt,\u201d said Moody\u2019s Senior Vice President Lucie Villa. <\/p>\n\n\n\n
Investors feel that while South Africa is \u201cnot on the verge of a crisis, there is this kind of slow deterioration happening and that, no matter what \u2014 even with a leadership that is trying to address this issue \u2014 it\u2019s proving very, very challenging<\/strong>,\u201d she said.<\/p>\n\n\n\n Long-term rates in South Africa exceed those in most emerging-market economies except Brazil and Mexico, Moody\u2019s data show. <\/p>\n\n\n\n Africa\u2019s largest economy has grown less than 1% on average annually for more than a decade, hamstrung by disintegrating infrastructure, graft, crime, logistics and energy constraints. <\/p>\n\n\n\n A study conducted by Investec Wealth & Investment International found that the economy is at least\u00a037% smaller<\/a>\u00a0than it would have been had it tracked its EM peers and sustained annual growth of 4.5% since 2010.<\/p>\n\n\n\n A coalition government formed by the African National Congress after it lost its outright majority in last year\u2019s elections hasn\u2019t managed to significantly accelerate reforms to speed up growth. <\/p>\n\n\n\n The low growth has denied the country much needed tax revenues, leaving it reliant on external funding, Moody\u2019s said. <\/p>\n\n\n\n \u201cYou have high debt costs, and then the government wants to do something to revive its economy and private sector,\u201d Villa said. <\/p>\n\n\n\n \u201cBut to do that, they need to invest. And to invest, they have to borrow, and they are borrowing at high rates.\u201d This results \u201cin a negative feedback loop that is difficult to break,\u201d she said.\u00a0<\/p>\n\n\n\n The country\u2019s ratio of debt to gross domestic product has more than doubled<\/a> over the past 15 years and the National Treasury expects it to peak in the current fiscal year ending March 31 at 77.4%<\/a>. <\/p>\n\n\n\n Some of the solutions Moody\u2019s proposes include hastening the implementation of reforms to improve the operation and management of critical industries like electricity, water, and transport and rationalise borrowing.\u00a0<\/p>\n\n\n\n The state should also seek concessional funding from development partners to help lower foreign-currency costs where possible, the agency said. <\/p>\n\n\n\n \u201cMixing normal debt with debt that is less expensive, limiting the amount of borrowing during the bridge period, and pushing in on your medium-term reform agenda\u201d could put the country back on track, Villa said.<\/p>\n\n\n\n Another ratings agency, Fitch, has added to the worrying picture for the country, projecting in a recent review that South Africa will overshoot its debt target.<\/p>\n\n\n\n While the National Treasury expects debt to GDP to peak at 77.4%, Fitch expects it to reach almost 80% in 2027, putting it well above its peers.<\/p>\n\n\n\n South Africa still has an elevated vulnerability to default risk, it said, particularly in the case of unfavourable changes in business or economic conditions.<\/p>\n\n\n\n The ratings agency pointed to perennial problems such as low real GDP growth, high levels of poverty and inequality, a high and rising government debt-to-GDP ratio, as impediments to economic recovery.<\/p>\n\n\n\n While it expects debt to accumulate more slowly over the years, many state-owned companies will continue to rely on the government for bailouts and financial support.<\/p>\n\n\n\n This will continue to add pressure on the fiscus, the group said.<\/p>\n\n\n\n With Bloomberg<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" South Africa is paying more to borrow than its emerging-market peers because the slow pace of reforms is dampening economic growth, according to Moody\u2019s Ratings.\u00a0<\/p>\n","protected":false},"author":10,"featured_media":744467,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[4771,1512],"class_list":["post-837643","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-debt","tag-moodys"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=837643"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837643\/revisions"}],"predecessor-version":[{"id":837645,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837643\/revisions\/837645"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/744467"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=837643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=837643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=837643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Debts rising<\/h2>\n\n\n\n