Moody's downgrades Outlook to "negative"

01 Nov 2019
Moody's downgrades South Africa

On today’s meeting Moody’s has decided to keep the country one notch above investment grade, changing its outlook on the country’s credit rating from stable to negative, but leaving it a “Life Line” as it requires at least one investment grade – from either Moody’s or Standard & Poor" to remain on the FTSE World Government Bond Index. Exiting it would spark an investor selloff and outflows of as much as $15 billion (R200bn), according to Bank of New York Mellon at a time when South Africa needs portfolio investment to finance its persistent current-account deficit. A downgrade would also raise borrowing costs, complicating the government’s efforts to balance the budget.

For a quarter-century, South Africa has been able to count on an investment-grade rating from Moody’s Investors Service. Financial markets have been pricing in a downgrade for months, and the other two major rating companies have had South Africa at junk status for two years. Should Moody’s ever follow suit, the nation would suffer enormous financial consequences, but for now the country is hanging on a thin thread.

The country’s economy is in turmoil and even though Tito Mboweni did a poor job in his Mid-Term Budget on 30 October, but Moody showed mercy, at least one more time.

The country’s economy needs to be turned around, everybody is clear on that, but between an impotent government without plans or answers and a new South African Generation, which feels not to pay taxes but to be entitled to each and every public service, this remains a mission impossible until such time where leadership changes and the age or reason returns back to all levels of society and we can once again reclaim our front seat on the African Continent.

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