Moody’s Downgrades 13 South African Sub-Sovereigns, Changes Outlook to Negative
JOHANNESBURG – Moody’s Investors Service today downgraded the ratings of 10 South African regional and local governments (RLGs) and three government-related entities (GRIs) and changed the outlooks to negative. At the same time, Moody’s affirmed their national scale ratings. The rating actions conclude the review for downgrade that commenced on 4 April 2017, Moody’s said in a […]
JOHANNESBURG – Moody’s Investors Service today downgraded the ratings of 10 South African regional and local governments (RLGs) and three government-related entities (GRIs) and changed the outlooks to negative. At the same time, Moody’s affirmed their national scale ratings.
The rating actions conclude the review for downgrade that commenced on 4 April 2017, Moody’s said in a press release.
In addition, Moody’s affirmed Bergrivier local Municipality’s global scale rating and upgraded its national scale rating in line with the new National Scale Mapping tables, and changed the outlook to negative from stable.
The South African government says it has noted Moody’s decision to downgrade South Africa’ long-term foreign and local currency debt ratings to ‘Baa3’ from ‘Baa2’, and pointed out the decision still puts the country at investment grade.
Moody’s said the downgrade was driven by the weakening of the country’s institutional strength, reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms. The rating agency also cited the continued erosion of fiscal strength due to rising public debt and contingent liabilities.
The agency said the negative outlook reflects continued downside risks for growth and fiscal consolidation associated with the political outlook. It said over the medium-term, economic and fiscal strength will remain sensitive to investor confidence.
In a statement, National Treasury said while the ratings are still investment grade, the negative outlook indicates that the risk of further downgrades is still there.
“The urgent priority is reigniting confidence as well as reclaiming and maintaining the investment grade ratings. The Minister of Finance will ensure that the joint work of government, business, labour and civil society continues at a faster pace. The commitment is to improve investor and consumer confidence through fast-tracking the implementation of the structural reforms on economic growth,” said National Treasury.
Government called on all South Africans, including the private sector and trade unions, to work even harder together to address concerns raised by the rating agency.
Sources: SAnews.gov.za, Moodys.com