Editor’s Note: April 01, 2019

South Africa gets a ratings reprieve

Credit ratings agency Moody’s has delayed a review of South Africa’s sovereign debt, originally scheduled for March 29.

No reason was given for the postponement, and no new date has been set, but it should be welcome news. 

Moody’s is the last of the three big ratings agencies to maintain an investment-grade ranking (Baa3 with a stable outlook) for South Africa. S&P and Fitch downgraded the country to junk in 2017, relegating it to sub-investment grade status.

The prospect of Moody’s following suit is very real. This would also have South Africa removed from Citi’s World Government Bond Index, making it even harder to attract sorely needed foreign investment.

The delay is a reprieve – time that must be put to good use. This was the message from a group of leading South African CEOs, calling on the government to work “relentlessly” to avoid any further downgrades.

Priorities should include more clarity on how it intends to reform the country’s state-owned enterprises – especially struggling power utility Eskom – and a clear strategy to boost growth and investment.

But the government already knows this. Pressure on president Cyril Ramaphosa to deliver on his promised post-Zuma ‘new dawn’ for the economy has been mounting for months.

Moody’s has just given him a bit more time.

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