ANC welcomes Moody’s confirmation of SA’s sovereign ratings

“The rating affirms the effectiveness of the measures put in place by government; signalling that indeed we are on the right track with our economy expected to start recovering beyond 2016,” ANC spokesman Zizi Kodwa said.

“The ratings are further a testament to our strong and maturing political system and the resilient and robust institutions that support it and our democracy,” he said in a statement.

The ANC commended “the efficacy of the societal compact championed” by President Jacob Zuma and Finance Minister Pravin Gordhan which brought together social partners in government, business, labour, and civil society to “yield the most welcome results in stabilising the labour environment and ensuring security of electricity supply”.

“While we are not oblivious to remaining challenges and existing concerns, the outcome of the review will go a long way to restoring investor confidence and attracting continued investment in our economy.

“The ANC is confident that government will continue with its program of aggressive fiscal consolidation while maintaining the delicate and very necessary balance between prioritising radical socio-economic transformation, meeting basic needs, and fiscal sustainability,” Kodwa said.

On Friday, Moody’s confirmed South Africa’s Baa2 long-term government bond and issuer ratings as well as its (P)Baa2/(P)P-2 shelf and MTN program ratings, and assigned a negative outlook.

The rating actions concluded a review for downgrade that commenced on March 8, 2016, the ratings agency said in a statement on its website.

“The confirmation of South Africa’s ratings reflects Moody’s view that the country is likely approaching a turning point after several years of falling growth; that the 2016/17 budget and medium-term fiscal plan will likely stabilise and eventually reduce the general government debt metrics; and that recent political developments, while disruptive, testify to the underlying strength of South Africa’s institutions.”

The negative outlook spoke to the implementation risks associated with the structural and legislative reforms that the government, business, and labour recently agreed to restore confidence and encourage private sector investment, upon which Moody’s expectations for growth and fiscal consolidation in coming years – and hence the Baa2 rating – relied.

In a related move, Moody’s also confirmed the Baa2 rating of ZAR Sovereign Capital Fund Propriety Limited, a special purpose vehicle whose debt issuance is ultimately the obligation of the South African government, and assigned a negative outlook.

Moody’s made no changes to South Africa’s local or foreign currency country ceilings, which remain at A1 for local currency debt and deposits, A2/P-1 for foreign currency debt, and Baa2/P-2 for foreign currency bank deposits.