30 Mar 2019

SA credit rating unchanged, no update from Moody’s

Tertia Jacobs, Investec Treasury Economist

Tertia Jacobs | Treasury Economist, Investec

South Africa’s credit rating remains the same at investment grade (Baa3).

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Moody’s has not updated ratings for South Africa. Nor has it done so for the state of Carinthia, the government of Cyprus, the state of Lower Austria, the government of Sweden, the city of Vienna or the government of Zambia.

The global rating agency was expected to deliver a country review for South Africa on Friday 29 March 2019.

It was widely thought that Moody's would drop the country's outlook from stable to negative while leaving the actual rating unchanged at 'investment grade'.

In March 2018, Moody's left SA's key credit ratings at investment grade (Baa3) and upgraded the sovereign's outlook from negative to stable.

The agency built into its analysis at the time both the market and perceived business sector’s euphoria resulting from the election of Cyril Ramaphosa to president.

Moody’s specifically identified back then that “the recent change in political leadership appears to have halted the gradual erosion of the strength of South Africa's institutions. With changes in governance, a number of key institutions, including the Treasury, the South African Revenue Service (SARS) and key State-Owned Enterprises (SOEs) have embarked on the recovery of their earlier strength.”

It also highlighted at the last country review in March 2018, that “recent years have seen a gradual erosion in the strength of some key institutions, with a correspondingly negative impact on economic and fiscal strength and on the effectiveness of policymaking.”

And furthermore “high and rising concerns regarding endemic high-level corruption, 'state capture' and pressures on the mandate and independence of key policy-making institutions such as the Reserve Bank have materially damaged economic confidence and effective policy-making, exacerbating the erosion in the government's balance sheet.”

Moody’s is set to review SA again on 1 November 2019 and continue its biannual review process in 2020.

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