rating agencies

SA Credit Rating on the Brink

SA has made some progress in fixing problems identified by ratings agencies, but there are outstanding issues that might mean the country is given 'junk' status, warn economists Fatima Bhoola and Nimisha Naik.

Rating agencies are shortly expected to announce their decision on whether to retain South Africa’s sovereign credit rating, or to downgrade it.

The current rank assigned by Moody’s is two notches above sub-investment grade (with a negative outlook).

Fellow agencies Fitch and Standard and Poor’s both rank South Africa just one notch above “junk” status.

South Africa and the Ratings Agencies – II Fitch

The most recent decision

Fitch affirmed South Africa's investment grade rating in June 2016. Long-term foreign and local currency Issuer Default Ratings (IDR) have been affirmed at BBB- and BBB respectively. The stable outlook remains unchanged.

Key drivers
 
The BBB- rating is a reflection of low trend gross domestic product (GDP) growth, significant fiscal and external deficits, and high debts levels. These are balanced by strong policy institutions, deep local capital markets and favourable government debt structure. 

South Africa and the Ratings Agencies – 1 Moody’s

South Africa is in the middle of controversies relating to the South African Revenue Service, the Hawks, the Minister of Finance, Pravin Gordhan, the National Treasury, and State-Owned Enterprises (SOEs). There are also serious tensions within the government and the ruling African National Congress. South African government bonds have lost money for investors as bond yields have increased. This could get worse if Gordhan is to be replaced by someone who is less trusted by investors.

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