Johannesburg - Moody's said on Thursday it saw no financial or economic risk to South Africa's sovereign rating and that there was room to borrow more from international markets after its recent successful foreign bond issue.
The ratings agency in March affirmed the positive outlook on the government's Baa1 foreign currency rating, although it has placed its A2 local currency rating on review, with the outcome due in mid July.
"We don't think there's financial risk to the (sovereign) rating. We don't think there's economic risk to the rating," said Kristin Lindow, Moody's Senior Vice President and sovereign analyst for South Africa.
"We have a positive outlook in place on the foreign currency rating. Most likely it would change upward if it were to change, not downward.
"The rating on the local currency rating, even if it comes down a notch, is still an A rating, and that's a vote of confidence in the midst of all this global turmoil," she told Reuters on the sidelines of a conference.
Lindow said while South Africa had fallen into recession with a 6.4% contraction in the first quarter of this year, this had been expected, adding that the country had overall fared better than its peers.
"We expect it (recession) to be relatively brief, probably 9 months, I don't think there's an indication that it will be much longer than that."
Lindow said because of its low debt levels, there was room for South Africa to borrow more from international markets after its recent successful foreign bond issue in which it raised $1.5bn, above the $1bn initially sought.
"Primarily the issuance is to refinance exiting maturities, so they wouldn't raise government debt levels by doing so. They do have space to borrow more. That's the beauty of having kept debt so low," she said.
Political stability
Lindow said Moody's assessment of political stability in South Africa had been somewhat tarnished after the ouster late last year of President Thabo Mbeki over allegations that he interfered in the corruption case - which has since been dropped - against his rival Jacob Zuma.
Zuma was subsequently elected South Africa's president in April, and has been at pains to assure foreign investors that his new government will continue to pursue the business-friendly policies of his predecessor.
"There were some concerns that we raised at the time of the ouster, although we did say that we thought it was constitutional ... the one worry on that is the precedent that it sets, to the extent that once you do something it's easier to do it next time," Lindow said of Mbeki's removal.
"The fact that the election went according to plan, and that there was still as much popular support as there was for the (ruling) ANC and yet there was also some rise in the proportion of people voting for alternative parties suggests the birth of a multi-party democracy and I think that would be healthy."
She said the government should retain its inflation targeting policy despite demands from powerful labour federation Cosatu and affiliate unions to either scrap it on the grounds that it has led to higher interest rates that have mostly hit the poor.
"Some sort of inflation anchor is key, and a low inflation anchor is key too. Cosatu wants better conditions for the poor and better conditions for the poor aren't achieved with higher inflation," Lindow said.
Other key considerations to South Africa's future ratings would be whether it could get back on its feet and grow at moderate rates, hopefully 4% plus to addressing social problems of poverty unemployment.
- Reuters