SA can't be complacent after Moody's rating - Nene

Former finance minister Nhlanhla Nene. (Bloomberg)
Former finance minister Nhlanhla Nene. (Bloomberg)

Johannesburg - South Africa can’t be complacent after Moody’s Investors Services affirmed credit ratings at investment grade, said Finance Minister Nhlanhla Nene.

While the government is in a “honeymoon phase” following the election of Cyril Ramaphosa as president and Nene’s return to the National Treasury, it has to take forward its agenda for structural reforms to promote economic growth, the minister said in an interview with Johannesburg-based broadcaster 702 on Monday.

The economy escaped a third junk rating on Friday when Moody’s kept the foreign- and local-currency assessments at Baa3, its lowest investment grade, and changed the outlook to stable from negative. The nation was cut to junk last year by S&P Global Ratings and Fitch Ratings after former President Jacob Zuma fired Pravin Gordhan as finance minister.

Ramaphosa, who replaced Zuma as leader of the ruling African National National Congress in December and as president last month, has since appointed Gordhan to head the ministry of public enterprises, which oversees state-owned companies.

S&P next

While the other rating companies will consider the same issues Moody’s did when they review South Africa’s assessments later this year, Moody’s decision won’t affect them, Nene said. S&P is scheduled to make a ratings announcement on May 25.

“When they do review us, they will be judging us based on what the situation is then,” he said. “If growth begins to take off, if we begin to address structural reforms, then they are also likely to look at us in a positive light.”

South Africa must still deal with growth concerns but has made “very good improvements” in the fiscal path, which reduces downward pressure on the rating, Gardner Rusike, a sovereign analyst at S&P, said in Johannesburg on Tuesday.

The company raised its forecast for South Africa’s economic expansion this year to 2% from 1%, accelerating to 2.1% in 2019, he said. This could help to improve the rating, Rusike said.

“We may have bottomed out on the current rating level,” he said.

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