SABC News - Political tensions a threat to Moody’s ratings:Wednesday 13 September 2017

Political tensions a threat to Moody’s ratings

Wednesday 13 September 2017 20:59

SABC

Moody's is the only one of three major ratings agencies which has kept both  South Africa's foreign and local debt in investment grade with a negative outlook.

Moody's is the only one of three major ratings agencies which has kept both South Africa's foreign and local debt in investment grade with a negative outlook.(REUTERS)

Ratings agency Moody's says it's keeping its eye on guarantees to state-owned enterprises, institutional independence and the impact of political tensions on the country's economy. However, it says it currently views all key credit rating factors in South Africa as moderate.

Moody's is the only one of three major ratings agencies which has kept both  South Africa's foreign and local debt in investment grade with a negative outlook. There are concerns about increasing borrowing costs, reduced investment and rand weakness if it too pushes us into junk.

Senior analyst for the ratings agency Zuzana Brixiova cited political tension and its impact on business confidence, the country's low growth, and an eroding fiscal space as downgrade risks. She was also asked about how a planned R10 billion rand bailout to South African Airways will affect the country's rating.  

"From a financial perspective this is not a major risk - it's more about what conditions are attached to this bailout - and the reforms they are taking to be self-sufficient,” she said.

Brixiova says they would be concerned if lenders to SOE's throw in the towel and leave them unable to survive alone. Moody's also raised the flag on eroding institutional independence and strength, citing recent unsuccessful recommendations to change the mandate of the Reserve Bank.

Some independent analysts attending today's Sub-Saharan Africa Conference say they believe Moody's will give us some breathing space until next year’s February budget before making a move on the rating.

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