Johannesburg - The National Treasury is set to meet with Moody’s to discuss SA’s economy it says in a statement issued on Wednesday.
This comes after the ratings agency said late on Tuesday that it had placed the country’s long- and short-term ratings on review for possible downgrade.
Should Moody’s cut SA’s rating, this would place the country a notch above junk status. Fitch and Standard & Poor’’s currently rate SA a level above junk after Fitch cut its rating last December.
A downgrade to junk status would make it more expensive for the country to borrow money and also dissuade investment.
Finance Minister Pravin Gordhan is currently out of the country meeting with investors and ratings agencies. He is accompanied by top CEOs.
In a statement, National treasury says Moody’s will visit SA between March 16 and 18 to either affirm the current ratings or downgrade them.
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During the visit, the agency will assess the views of various stakeholders in government, civil society, labour and in the private sector on a number of areas, including, among others whether:
a) The decline in South Africa’s economic strength will be reversed in the medium term
b) Sufficient progress can be made to stabilise and restore fiscal strength
c) Policy is likely to lead to a reversal in the continuing erosion of the government’s balance sheet
Treasury notes it will highlight collaborative actions aimed at accelerating inclusive growth as well as measures adopted in the 2016 Budget to accelerate fiscal consolidation and to give effect to the National Development Plan.
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National Treasury will also point out the steps it will take to reinforce stable industrial relations, the accelerated implementation of its R870 billion infrastructure investment as well as progress being made to resolve the energy crunch and what steps it is taking to strengthen state-owned entities.
Moody’s says its pending review was taken because of the continuing rise in risks to the country's medium-term economic prospects and to its fiscal strength.
This, it says, is despite the tighter fiscal stance undertaken in the 2016/17 budget.
“The review will allow Moody's to assess to what extent government policy can stabilise the economy and restore fiscal strength in the face of heightened domestic and international market volatility.”
Moody’s says it would confirm the rating if the review were to conclude that policymakers will maintain spending restraint, succeed in the delivery of planned structural reforms, achieve the fiscal consolidation envisioned in the 2016/17 Budget Review, and thereby reverse the deterioration in key credit metrics witnessed in the past few years.
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