Ratings agencies keep a watchful eye on Ramaphosa's Cabinet

Ratings agencies and investors will have a watchful eye on who makes the cut for Cabinet. Courtesy of #DSTV403

JOHANNESBURG - Ratings agencies and investors will have a watchful eye on who makes the cut for Cabinet.

South Africa risks losing its only investment-grade rating if it fails to convince Moody's that it is pursuing growth reforms.

READ: Moody's bleak on SA outlook

Moody's, the only ratings agency keeping the country on investment-grade said last week it was watching the composition of the incoming administration. 

A favourable rating enables government to raise capital internationally.

Investment-grade status tells investors and banks that the credit quality of a country is worthy.

READ: Moody's skips SA's sovereign credit rating announcement

But a junk rating raises flags that a country may default. Then the cost of borrowing becomes more expensive.
Economist Ian Cruickshanks says the Cabinet composition is a significant signal to investors.

"That's where Mr Ramaphosa must say I have people in government who can look and stand with responsibility - which we have not being doing.. and stick to the rules of the land."

S&P Global is scheduled to give its latest review on Friday. It currently has the country in junk.

Source
eNCA