Clear ANC win is good for credit rating and NDP action - Moody’s

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Johannesburg - The ANC’S decisive win in last week’s general election was positive for the country’s credit rating as it signalled the ruling party would stick to its economic policy, Moody’s Investors Service said yesterday.

“Thanks to its clear majority win, the incoming administration will be less indebted” to the ANC’s allies in labour and the SACP, which supported nationalisation of industries, increased government spending and looser monetary policy, the rating agency said in a report.

The government could now implement more directly its National Development Plan (NDP), a 20-year economic programme that has been opposed by labour unions, it said.

Moody’s has kept a negative outlook on South Africa’s credit rating since September 2012, when it was downgraded to Baa1, the third-lowest investment grade level.

The rand rose as much as 0.5 percent against the dollar to R10.303 by noon, the biggest increase of 16 major currencies tracked by Bloomberg, and taking its gain to 1.5 percent since last Wednesday’s election. At 5pm the rand was bid at R10.3235 a dollar, 5.52c firmer than the same time on Monday.

The ANC won 62.15 percent of the national vote last week, ensuring a second term for President Jacob Zuma, who has been tainted by corruption allegations related to the use of taxpayers’ money to upgrade his personal residence.

The DA won 22.23 percent, followed by 6.35 percent support for the Economic Freedom Fighters, which is pushing for the nationalisation of banks and mines.

Fitch Ratings said its assessment depended on whether the government could sustainably increase economic growth through “structural reform”. It rates South Africa’s debt at BBB, one level below Moody’s, with a stable outlook.

“Without stronger growth, faster job creation and a narrowing of the fiscal and current account deficits, which continue to push public and external debt ratios up, South Africa’s creditworthiness will gradually deteriorate,” the London-based agency said.

Fitch will hold the next scheduled review of the rating on June 13.

Zuma pledged at the weekend to intensify efforts to reduce poverty and unemployment, saying the election win gave the ANC the “green light” to implement the NDP. The government is forecasting 2.7 percent expansion this year.

Moody’s said: “We expect a partial reshuffling of the cabinet to install ministers [who] agree with the broad macroeconomic framework, including government spending and deficit restraint, inflation targeting and a free-floating exchange rate, and the general direction in the NDP.” – Bloomberg


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