South Africa: Moody's Should Not Be Made the Scapegoat for Government's Failures

(file photo).

Moody's recently downgraded South Africa to sub-investment grade, resulting in much local criticism of the rating agency. But Moody's was justified in taking this action, and the blame for doing so should be addressed not so much to them but to SA's government.

In a recent editorial for Maverick Citizen, Mark Heywood wrote that South Africa should "Stop Dancing to Moody's tune". According to Heywood, Moody's recent downgrade of South Africa's sovereign credit rating was tantamount to "kicking somebody when they are down", and that Moody's decision "embodied the worst expression of unbridled private interest".

Heywood's critique, however, is flawed and merely serves to scapegoat an institution whose mission is to provide factually accurate credit ratings for investors (though it has not always done so), instead of laying the blame where it rightfully belongs: at the feet of the South African government.

South Africans are not unfamiliar with the names Fitch, Standard and Poor's (S&P), and Moody's, the three behemoths of the credit rating industry.

Government has done what can only be considered its utmost best to give these agencies every conceivable reason for downgrading the credit rating of the economy to junk status. However, out of the three agencies,...

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