Economists fear that following Friday’s news about Fitch Ratings adjusting South Africa’s sovereign debt outlook from “stable to negative”, Moody’s could follow suit and downgrade the country to so-called junk status.
Efficient group economist Dawie Roodt said this morning “it’s actually surprising” that Moody’s, the only debt ratings agency to have maintained SA’s above-grade investment rating, had not yet downgraded the country.
The move has been widely seen as recognition of Cyril Ramaphosa’s government to ring in substantial changes which included the appointment of ministers Pravin Gordhan and Tito Mboweni in key positions.
But the country’s sluggish economy, growing at 0.6% according to the latest batch of figures released by Statistics SA does not bode well, and last week’s government announcement that it was throwing Eskom a R59-billion lifeline was immediately criticised by Moody’s as very risky for the economy.
Now, following Friday’s Fitch announcement, South Africa’s Moody’s rating seems to be in severe jeopardy, despite recent developments around the curbing of government spending.
The Eskom bailout, it seems, is widely seen as government being reckless with budgetary amendments on the one hand whilst simultaneously trying all it can to slash spending.
Roodt reiterated warnings that should South Africa lose its last above-grade investment rating, it would be disastrous for the economy as investors will be forced to withdraw from the country’s bond market.
An earlier figure bandied about spoke of a flight of $100 billion from the economy in the event of a Moody’s downgrade.
