Moody’s warns on strike impact on SA credit rating

2013-05-15 13:29

Mining strikes, unemployment and skills shortages are pushing South Africa toward another credit rating downgrade, Moody’s warned, while noting some progress toward reform.

The ratings agency’s senior vice-president for sovereign risk, Kristin Lindow, said today Moody’s maintains a negative outlook after it downgraded the country to Baa1 last September.

Lindow warned that Africa’s largest economy was growing too slowly to eradicate inequality.

Although sub-Saharan Africa is expected to grow at more than five percent this year, South Africa’s sluggish 2.7% growth will not be enough to eradicate extreme gaps between rich and poor.

That gap has widened since apartheid ended in 1994, said Lindow.

“There has been a relatively severe deterioration in equality since the transition.”

Compounding that bleak picture Lindow said recovery in job creation since the 2008 economic crisis had been slow.

“We’re still below to where we were prior to the crisis.”

Almost five million South Africans – 25.2% of the eligible population – were unemployed in the first quarter of this year.

Lindow also said labour unrest at the country’s crucial mines was troubling.

“There’s a mismatch between the expectation of labour and the expectation of mines,” she said.

“It seems that both sides are talking past each other, not to each other.”

Poor education also translated into skills shortages that negatively affected businesses and government performance, said Lindow.

But it was not all bad news.

Lindow noted the country continued to have a robust bank system and that government had rejected mass nationalisation.

The ANC’s final rejection of a plan to nationalise the country’s mines and endorsement of an all-encompassing development plan were encouraging, she added.

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