Treasury's Mogajane: 'We had to safeguard the ratings with our lives'

Treasury Director General Dondo Mogajane. (Photo: Gallo Images / The Times / Esa Alexander)
Treasury Director General Dondo Mogajane. (Photo: Gallo Images / The Times / Esa Alexander)

Johannesburg - Treasury Director General Dondo Mogajane says “emotions ran high” among senior staff after they learned Moody’s Investor Services would grant the country a rating reprieve while revising SA's outlook from negative to stable.

“If Moody’s downgraded us, we would have been out of the Citi World Government Bond Index, [this] means some investors I know in Hong Kong, London and New York told us they’ll have to reduce their exposure (to government bonds)”, Mogajane told Fin24 in a telephone interview on Saturday morning.

Moody's on Friday night affirmed SA's long term foreign and local currency debt ratings at ‘Baa3’, one notch above sub-investment grade.

It also revised its outlook to stable from negative, citing changes in SA's political arena, the strengthening of key institutions, improved economic growth, and commitment to fiscal consolidation.

Treasury officials received the rating review around 48 hours before it was made public.

“We had to safeguard the ratings with our lives, it hasn’t been easy, the sacrifices [people in] Treasury made were on behalf of the country,” an emotional Mogajane said.

“We will pop champagne on Monday, will give the team 30 minutes to rally around and thank each other and then carry on working. Budget 2019 processes will get underway soon”.

Mogajane spent the last few weeks out of the country as part of an investor roadshow, which included meetings with ratings agencies and attending the G-20 summit of finance ministers and central bankers in Buenos Aires, Argentina.

He told Fin24 that, by the time he was finished talking to Moody’s in London earlier this month, he was “comfortable” that the credit rating on SA government debt would not be cut to sub-investment grade.

“We are not surprised, because our story holds, the story put together for the budget holds”.

Future upgrades

Standard & Poor’s and Fitch are expected to review South Africa’s credit rating in the next few weeks. Both ratings agencies have generally been more pessimistic about SA's economy than Moody’s.

They both downgraded South Africa to sub-investment grade in 2017. 

Mogajane said the country “wouldn’t have to do much” for the ratings to be revised upwards, adding SA can “only be looked at differently” due to structural reforms being undertaken.

“There was a peaceful transition from the Zuma administration to the Ramaphosa administration,” he said. “They were worried about the debt to GDP ratio, it was hitting the roof, and we addressed the issues on the revenue side and the expenditure side”

“They had issues with state owned companies, nothing was happening. We dealt with Eskom, there’s a new board and Eskom is on the right track, lenders are coming back to Eskom”, Mogajane said

Watching land reform 

The director general said he’s “eagerly watching” the work being done by the constitutional review committee on the National Assembly’s resolution to investigate changing legislation to accelerate land reform.

“We shouldn’t be alarmed … we can’t approach the land issue lightly”. The issue was raised by ratings agencies and investors in London and the US.

Moody’s, in its rating announcement Friday, said the way government handles land expropriation will be a test of its ability to balance attracting investment and alleviate poverty.

Mogajane pointed to the “pretty peaceful” democratic transition as an example that the country is able to engage in “difficult conversations”.

“I am comfortable we are on the right track”.

There are several “low hanging fruit” which the government can use to increase economic growth and confidence this year, including the opening up of spectrum in the telecommunications industry and the finalisation of the reviewed Mining Charter. 

“I’m comfortable that the minister of mineral resources, Minister Mantashe, understands the sector. He’s senior in the ANC and committed to turning around the sector.”

He said there has been no new investment in the mining industry over the last few years, due to policy uncertainty. The resolution of the impasse over the Charter will give the sector the boost that it needs. he said. 

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