Pretoria - Government says it has noted Moody’s decision to downgrade South Africa’ long-term foreign and local currency debt ratings to ‘Baa3’ from ‘Baa2’.
The rating agency announced on Friday that it had moved South Africa’s long-term foreign and local currency debt ratings to ‘Baa3’ from ‘Baa2’ and maintained the negative outlook. The decision still puts the country at investment grade.
Moody’s said the downgrade was driven by the weakening of the country’s institutional strength, reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms. The rating agency also cited the continued erosion of fiscal strength due to rising public debt and contingent liabilities.
The agency said the negative outlook reflects continued downside risks for growth and fiscal consolidation associated with the political outlook. It said over the medium-term, economic and fiscal strength will remain sensitive to investor confidence.
In a statement, National Treasury said while the ratings are still investment grade, the negative outlook indicates that the risk of further downgrades is still there.
“The urgent priority is reigniting confidence as well as reclaiming and maintaining the investment grade ratings. The Minister of Finance will ensure that the joint work of government, business, labour and civil society continues at a faster pace. The commitment is to improve investor and consumer confidence through fast-tracking the implementation of the structural reforms on economic growth,” said National Treasury.
Government called on all South Africans, including the private sector and trade unions, to work even harder together to address concerns raised by the rating agency.
Interventions
Government said the foundation for a higher growth path and socio-economic development has already been laid, as the National Development Plan (NDP) continues to anchor all policies of government. It said the Nine-Point Plan has been approved as a catalyst for growth in the immediate horizon and is being implemented.
Reforms to address the structural challenges that limit economic growth potential are already being implemented and progress has been made, especially on labour reforms.
Meanwhile, reforms to address governance and financial weaknesses besetting State-owned companies (SOCs) are being implemented. Cabinet has also endorsed a private sector participation framework to guide collaboration between SOCs and the private sector on infrastructure projects.
Cabinet has also adopted a guideline for the remuneration and incentive standards for directors of SOCs. It has approved the broad thrust of a guide for the appointment of boards and executive officers.
Cabinet has recommended further consultation on the first draft of a new government shareholder policy, which will culminate in overarching legislation for SOCs. It has also noted the proposal to determine and cost the developmental mandates of SOCs.
Other key policies that are being concluded that have the potential to raise investment include:
- The Mining Charter;
- Broadband spectrum;
- The revised draft of the Integrated Energy Plan and the base case and assumptions of the Integrated Resource Plan;
- Amendments on the Labour Relations Act;
- Draft First Amendment of the Immigration Regulations; and
- The Regulation of Land Holdings Bill and Communal Land Tenure Bill.
National Treasury said policy transparency and continuity remain on top of government’s agenda and the ruling party in 2017.
“The outcomes of the conferences of the African National Congress in June and December 2017 are not expected to translate to policy changes. The publicly announced draft policies should cement concerns of policy deviations in the next five years,” said Treasury. – SAnews.gov.za
