Moody’s keeps SA at investment grade

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CAPE TOWN,  April 2 – Moody’s on Tuesday issued a credit opinion maintaining South Africa’s sovereign credit rating at investment grade.

It kept the country’s rating at Baa3, the lowest rung of investment grade, with a stable outlook. The note was published a few days after the last of the three biggest rating agencies to keep the country at investment grade, delayed a much-expected review of South Africa’s creditworthiness.

“While economic growth will remain slow and fiscal strength will continue eroding, we expect South Africa’s credit profile to remain in line with those of Baa3-rated sovereigns,” Moody’s said.

‘We expect that the government’s policies and the institutions will remain focused on addressing this trend but any reversal will be gradual at best given that social, economic and fiscal policy objectives will remain difficult to reconcile.”

Moody’s named political divisions, growth-limiting structural economic bottlenecks, and the weaknesses of state-owned enterprises as the credit challenges South Africa faces.

It said deep-rooted social and political differences continued to hamper reforms and create policy uncertainty.

On the positive side, the agency listed the strength of institutions like the judiciary and the South African Reserve Bank, the country’s well-capitalised banking sector and relatively deep financial markets as well as the government’s low level of foreign currency liabilities.

The reprieve comes a month before national elections and saw the rand firm further. The currency rallied after Moody’s said on Friday it would not publish a review of South Africa’s debt rating, deviating from a release date published earlier this year.

There had been fears of a downgrade after Eskom’s woes worsened last month, with the power utility implementing Stage 4 load shedding following plant breakdowns and the interruption of imports from Mozambique as Cyclone Idai hit the neighbouring state. (ANA)