Moody’s affirms South Africa’s credit rating

This week started on a note of relief as the ratings company Moody’s stayed South Africa’s rating grade. With this decision the country’s outlook changed from a negative to a neutral rating.

Emphasis was placed on increased transparency in institutions and improved growth aspects.

Moody’s rating was made against the backdrop of the election of President Cyril Ramaphosa, the recapturing of the state, the reappointment of finance minister Nhlanhla Nene and the Budget Speech.

“The sentiment towards South Africa has lifted markedly in the past four months. With the latest influx of good news, we could see the rand enjoying a favourable run in the short term,” said Andre Botha, dealer at TreasuryONE.

Other perks we may enjoy is increased economic growth in 2018, which could now be about 1.8%. This, in contrast to the 1.3 % forecast only a few months ago, said prof. Raymond Parsons from the North West University School of Business and Governance.

Another prediction is that the Moody’s rating may also encourage the South African Reserve Bank (SARB) to make a modest cut in interest rates at this week’s Monetary Policy Committee (MPC) meeting. Other factors that strengthen this prediction are a stronger rand and the lower inflation rate.

“Although the recent positive developments have gained SA a well-deserved reprieve from Moody's, there are still tough decisions needed to implement the structural reforms. This would ensure much higher and sustained economic growth over the longer term,” continued Parsons.