The Moody's logo is shown outside the offices of Moody's Corporation in New York, New York, USA. The ratings agency has downgraded of South Africas debt rating to one level above junk status, putting further pressure on the economy.
PRETORIA – Deputy President Cyril Ramaphosa has welcomed the confirmation by Moody’s Investor Service of South Africa’s sovereign ratings at Baa2, the presidency said on Sunday.
“We are very pleased with [the] Moody’s report where they have kept our rating status as is. Many people were thinking that they would downgrade us; now they haven’t and that is a great success for us because that shows what we can achieve when we work together,” Ramaphosa said in Mbizana in the Eastern Cape.
“We have to congratulate our [National] Treasury for having led the charge working together, obviously as a whole, as well as other organisations, trade unions, business, civil society,” he said.
“It was very pleasing to see them travel to the investors overseas as a united team, essentially as team South Africa going to sell South Africa and explain everything about our country. So it is great news and a great success and as South Africans we can congratulate ourselves.
“But it is not over yet because there is another rating that is coming and this is when we must work harder and unite and demonstrate that South Africa is solid, it is stable, and that we are a worthy investment destination,” Ramaphosa said.
On Friday, Moody’s confirmed South Africa’s Baa2 long-term government bond and issuer ratings as well as its (P)Baa2/(P)P-2 shelf and MTN program ratings, and assigned a negative outlook.
The rating actions concluded a review for downgrade that commenced on March 8, 2016, the ratings agency said in a statement on its website.
“The confirmation of South Africa’s ratings reflects Moody’s view that the country is likely approaching a turning point after several years of falling growth; that the 2016/17 budget and medium-term fiscal plan will likely stabilise and eventually reduce the general government debt metrics; and that recent political developments, while disruptive, testify to the underlying strength of South Africa’s institutions.”
The negative outlook spoke to the implementation risks associated with the structural and legislative reforms that the government, business, and labour recently agreed to restore confidence and encourage private sector investment, upon which Moody’s expectations for growth and fiscal consolidation in coming years – and hence the Baa2 rating – relied.
In a related move, Moody’s also confirmed the Baa2 rating of ZAR Sovereign Capital Fund Propriety Limited, a special purpose vehicle whose debt issuance is ultimately the obligation of the South African government, and assigned a negative outlook.
Moody’s made no changes to South Africa’s local or foreign currency country ceilings, which remain at A1 for local currency debt and deposits, A2/P-1 for foreign currency debt, and Baa2/P-2 for foreign currency bank deposits.