South Africa's credit ratings remains unchanged

Nov 26, 2017, 01:07
South Africa's credit ratings remains unchanged

In April, Fitch downgraded South Africa's credit rating to sub-investment grade after Zuma abruptly fired Pravin Gordhan as finance minister, saying it would likely result in a change in economic policy direction.

It added that SA maintained credit strengths that supported its current rating including deep domestic financial markets and a well-capitalised banking sector; a strong macroeconomic framework; and low foreign currency debt as well as strict adherence to the constitution.

Moody's and S&P Global Ratings are due to announce their decisions on Friday.

Business Leadership South Africa (BLSA) says there needs to be an urgent commitment to the broader economic crisis to avoid more downgrades.

But it said that the rating could come under further pressure if standards of public governance slipped, such as more perceived attacks on the South African Reserve Bank's independence.

Meanwhile, ratings agency Moody's has chose to keep its rating unchanged and says it will wait until the ANC elective conference next month and the budget in February next year.

The review period is expected to conclude by the 2018 budget in February. This will allow it to factor in the outcome of the ANC conference.

This has left the ZAR exchange rate now vying with the New Zealand Dollar to be the worst-performing major currency in the 2nd half of 2017, with political turbulence, high public debt and low business confidence leaving the Rand floundering. But this has now also been downgraded to non-investment grade.

The Euro South African Rand (EUR ZAR) exchange rate climbed today as markets reacted to a run of mostly upbeat Eurozone data releases and decelerating South African inflation.

Moody's opted to keep both the country's foreign- and local-currency ratings on Baa3, its lowest investment grade ranking, but put them on review for possible downgrade.

South African debt has already been dropped from one of the widely used global bond indexes, the JPMorgan Emerging Market Bond Index Global according to Matthews.

Kristian Rouz - South Africa is ready to implement fiscal reforms in its next year's budget after the global rating agency S&P cut its local currency debt rating further into "junk". Importantly: "it reduces the money available for housing, education, healthcare and social grants".

In a statement on Friday‚ Moody's said: "The decision to place the rating on review for downgrade was prompted by a series of recent developments which suggest that SA's economic and fiscal challenges are more pronounced than Moody's had previously assumed".

Zuma is accused of enriching a new corrupt elite rather than helping the poverty-stricken black majority.

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