Rating agency Moody’s today said it would consider changing South Africa’s rating outlook from negative to stable if the government were to implement policies and reforms that indicated the continued independence and strength of South Africa’s policy institutions.
The rating agency says that the future trajectory of the rating will depend on the government's success in safeguarding South Africa’s institutional, economic and fiscal strength.
“Indications that the strength and independence of the country’s institutions have diminished to a greater extent than in Moody’s baseline scenario, or that the emerging policy framework has become even less predictable or has shifted in a way likely to undermine economic or fiscal strength, could lead to a further downgrade,” Moody’s says.
Also read: Rand stays firm as downgrade fears diminish
Moody's has South Africa's long-term foreign and local currency debt ratings at Baa3, with a negative outlook. It is the only rating agency that has South Africa’s foreign-currency and rand-denominated debt at investment grade.
On Friday Moody’s Investor Services did not publish a rating review of South Africa as was widely anticipated, with the agency saying that South Africa has not had any real major events that would require a review.
Moody’s says that a decline in the value of guarantees to state-owned enterprises would also be credit positive.
“Further delays in growth enhancing reforms would be suggestive of such a shift.
Downward pressure could also develop if liquidity pressures begin to reemerge at state-owned enterprises that would elicit pronounced government intervention, be it through the activation of guarantees or other measures.”
Last month the National Treasury announced that it will give South African Airways (SAA) a financial bailout to allow the airline to settle its R2.3bn debt with Standard Chartered Bank.
- BUSINESS REPORT