Government notes Moody's decision

Friday, September 28, 2012

Pretoria - The decision by rating agency Moody's Investor Services to downgrade South Africa's government bonds to Baa1 from A3 with a negative outlook has been noted by Government, said National Treasury.

Diminishing government institutional strength, reduced fiscal space, increased concerns about future political stability and relatively high labour costs despite high unemployment were some of the reasons given by Moody's for the downgrade.

"We note the decision which takes the South African rating by Moody's to the same level as Fitch and Standard and Poor's," said Treasury on Thursday.

The reasons given by the rating agency for the downgrade are currently being addressed through various government programmes.

"Some of the drivers of the downgrade have their roots in the protracted crisis in the Eurozone, South Africa's significant trading partner. Government remains committed to taking the necessary measures to lift the growth potential and competitiveness of the South African economy," it said.

Government remains committed to the objectives of the 2012 Budget which include instituting a range of measures to improve the competitiveness of the manufacturing sector, including regulatory reforms and competitiveness; redirecting exports to countries that show more resilience, such as on the African continent, China and the rest of East Asia.

Government is also committed to continuing to invest in education and skills development and investment in infrastructure to increase the capacity of networks.

"The core of South Africa's policies remains stable and predictable."

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