South Africa's political infighting adding to downgrade risk: Moody's

PUBLISHED: Thu, 15 Sep 2016 16:08:26 GMT

Political infighting, weak economic growth and mounting debt at state-owned companies all pose a risk to South Africa’s credit rating, Moody’s said on Thursday.

Moody’s, which rates Africa’s most industrialised economy two notches above sub-investment grade, said its negative outlook reflected “wide and rising political divisions that generate policy uncertainty and impede structural reforms”.

President Jacob Zuma and Finance Minister Pravin Gordhan are locked in a power struggle over spending at state-owned companies and plans for a multi-billion dollar nuclear power programme, political and financial analysts say.

Zuma denied this week that there was a “war” between the Presidency and Treasury.

“Policy paralysis and infighting is another risk, which is

becoming evident with, for example, increased uncertainty about continuity of leadership at the National Treasury,” Moody’s said in its quarterly credit opinion.

Moody’s affirmed its Baa2 rating on South Africa in May. Fitch and S&P Global Ratings have South Africa one step above subinvestment, or “junk”, with negative outlooks. All three are expected to make their next ratings decisions in December. [L5N184033]

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