19 March 2018

South Africa: Business, Labour Confident Moody's Will Grant SA a Ratings Reprieve

Photo: kev-shine/Flickr
(file photo).

Business and labour say that the mood appears to be "positive" that credit ratings agency Moody's will give South Africa a reprieve on Friday, after a three-leg international roadshow by Treasury, business and labour last week.

"We saw all three ratings agencies (in London) and I'm happy to say that the mood seems to be positive," Business Leadership South Africa (BLSA) CEO Bonang Mohale told Fin24 by phone, from New York.

"We have been very well received... our story is much easier to sell and much more believable."

Dennis George, General Secretary of the Federation of Trade Unions of South Africa (Fedusa), said while "it's difficult" to see from the body language of officials, he's positive that Moody's will maintain South Africa's credit rating at the end of the week.

In November, Moody's Investors Service placed the Baa3 long-term South African bonds on review for a downgrade.

At the time, the ratings agency cited that growth prospects have been weaker than expected and material budgetary revenue shortfalls have emerged alongside increased spending pressures.

In his February budget speech, former finance minister Malusi Gigaba announced R85bn in spending cuts over the next three years and a combination of tax increases to grow revenue by R36bn in the next financial year.

Moody's is the last of the three major ratings agencies to still rate South Africa as investment grade. If it downgrades the country, South Africa will automatically be removed from the Citi World Government Bond Index (WGBI), forcing asset managers to sell South Africa's bonds.

Land reform concerns

Team SA met a total of 120 investors in London, New York and via tele-conference to Boston, due to inclement weather. Mohale said newly appointed Finance Minister Nhlanhla Nene was seen as a "trusted hand" in meetings.

The delegation had to field several questions about the resolution by the National Assembly to consider amendments to section 25 of the Constitution, which guarantees property rights.

Mohale said that the business sector sought to reassure investors that as domestic companies, they're satisfied that land reform will be undertaken in "an orderly manner".

"If this [issue] wasn't adequately addressed, it would be irresponsible. It was the original sin. Leaving it would have increased political populism," he said.

George said that labour pointed out during the meetings there had been similar issues around the calls for nationalisation of mines, which the ANC-led government had dealt with.

The meetings last week formed part of a no-deal roadshow and Mohale said that Treasury will go back overseas to secure around $3bn in the next few weeks.

It's a busy period for Nene as Treasury confirmed he's currently attending the G-20 meeting in Buenos Aires, Argentina together with Treasury's director-general Dondo Mogajane.

US President Donald Trump's increased talk of protectionism is expected to loom large over the G-20 meeting of finance ministers and central bankers.

Source: Fin24

South Africa

Land Expropriation - Mbeki Slams ANC for Deviating From Non-Racialism

Former president Thabo Mbeki has lashed out at the ANC, saying its new policy to expropriate land without compensation… Read more »

See What Everyone is Watching

Copyright © 2018 News24Wire. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 600 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.