JOHANNESBURG -South Africa’s economic growth prospects will be limited by weak business confidence while uncertainty around land and mining reforms remain a concern for investors, ratings agency Moody’s said on Tuesday.
South Africa’s President Cyril Ramaphosa has outlined plans to redistribute land without compensation to address racial inequalities that persist more than two decades after the end of apartheid. Government critics have expressed concern that those plans could infringe on property rights.
The government also plans to increase the ownership stake for black people at mining companies to 30 percent from 26 percent within five years as well as other requirements aimed at benefiting communities - moves that have been contested by mining firms.
“Uncertainty over how this (land reform) will be achieved continues to limit near-term investment,” Moody’s analyst and senior credit officer Lucie Villa said in a report.
“(It) could ultimately lead to a more pronounced fall in investment should the final terms of land reform be particularly onerous to businesses.”
Moody’s is the last of the top three major rating agencies to rate the country’s debt in investment grade. It affirmed that rating in March and revised its outlook to stable from negative citing an improving policy framework.
Moody’s said in the report it projects gross domestic product at 1.6 percent in 2018 and 2.1 percent in 2019.
The Treasury’s forecasts growth at 1.5 percent and 1.8 percent respectively for the same period, although Finance Minister Nhlanhla Nene has said these could revised upwards.
Nene is one of many new ministers appointed by Ramaphosa who has promised to turn around the ailing economy after taking over in February from Jacob Zuma. The former president has been blamed for the country’s many fiscal and policy missteps over the past decade. Zuma denies any wrongdoing.