S.Africa’s sovereign rating stable despite political uncertainty: Moody’s - CNBC Africa

S.Africa’s sovereign rating stable despite political uncertainty: Moody’s

Southern Africa

by Trust Matsilele 0

Ratings agency Moody’s sees South Africa’s sovereign rating as stable despite weak growth through 2017.

Ratings agency Moody’s sees South Africa’s sovereign rating as stable despite weak growth through 2017.

“The successful implementation of planned structural reforms to enhance potential growth and reduce exposure to external shocks, combined with continued fiscal prudence, could exert upward pressure on the rating,” said Moody’s.

The agency said government debt metrics have continued to rise despite spending restraint.

“Interest payments have been the fastest-growing item in the budget for more than three years,” said Moody’s.

The agency said the stable outlook includes expectation of return to a higher growth trajectory towards the end of the decade and beyond.

Moody’s senior vice president, Kirstin Lindow added that key to the stable outlook was strict budget management, adherence to spending ceilings which could rise when growth resumes at rates of three per cent to four per cent.

Lindow indicated the challenges with political uncertainty in South Africa with the possibility of affecting investor sentiment.

However, the ratings agency warned that the country could get a downgrade rating if official commitment to fiscal consolidation and stabilisation falters.

South Africa has also been warned of possible negative impact among the investor community especially with issues around its narrowing of BBBEE, restrictions to farm size, mining bill amendments and splintering of the labour union.

Lindow said the possible emergence of a competitive left-wing party likely by the time of the next parliamentary election of 2019 could bring into question the ruling ANC’s continued dominance.

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