Fin24

Moody’s downgrades SA

2012-09-27 17:48

Johannesburg - Moody's downgraded South Africa's credit rating by one notch on Thursday, citing concerns about the government's ability to tackle economic problems as well as political jostling with the ruling ANC.

The drop to a Baa1 rating will likely spell higher borrowing costs for Africa's largest economy, reports AFP.

The main driver of the downgrade “is Moody’s lowered assessment of institutional strength to 'moderate' from 'high', an important factor in the rating agency’s judgment of a sovereign’s economic resiliency,” the rating agency said in a statement.

The outlook remains negative.

The downgrade occurred because Moody's does not believe the state has as much capacity to solve the countries socio-economic challenges as they first thought, said Peter Attard Montalto Director, Emerging Markets Economist at Nomura International.

"They also highlight the limited room for fiscal movement and deteriorating debt metrics and low rates together with a negative FDI climate."

Montalto saidin an e-mail to Fin24 the downgrade came much earlier than they'd expected. "We thought they would wait till after Mangaung in December but they keep the rating on negative given the possible policy outcomes of that elective conference."

He added that the government has totally underestimated the potential for a downgrade, instead focusing on banking stability and the fiscal outlook.

"Whilst Moody’s does mention fiscal here, the key change is around the state’s capacity to solve societies problems. We have said for some time it would be this and SA’s socio-economic challenges that would lead to a downgrade, not things like debt sustainability.

"As the strikes in South Africa spread both within the mining industry and to elsewhere in the economy, we think the prospect for further downgrades from other agencies remains very high, and for that likelihood to rise yet further after Mangaung where the policy direction has the potential to entrench further policies which harm competitiveness like further state involvement in the economy, mining taxes etc.

"Our original view that a downgrade on a Zuma victory is more likely than on a Motlanthe victory in this context still stands for the other agencies and with respect to Moody’s cutting again," said Montalto.

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Comments
  • Zahir - 2012-09-27 17:59

    This is a big vote of no confidence in this dysfunctional govt the world can see the anc failure to build the country after 20 years

      thandiwe.ngema.71 - 2012-09-27 18:10

      Now all three credit agencies have us on the same level - Moody's took their time to realise!! What a sense of timing too - we join the Citi bond index on Monday!!

      kolobe.mzansi.7 - 2012-09-27 18:15

      let them go hang themselves...countries like spain with 50% youth unemployment still look good in their eyes. will only get worried over down grade by eastern institutions. them, UN, NATO, world bank,IMF etc are only looking out for the west

      nigel.vanysendyk - 2012-09-27 18:18

      thanks to Malema, Unions & the ANC Government, they are slowly but surely stuffing up the country, ANC & ANCYL supporters will say, who cares, but sooner than later they will be punished by the world & it will be too late, SA will be on its decline & will soon lose its status as a leading economy in Africa & a net exporter of food. South Africans (& I specifically refer to Black ones) had better start waking up soon.

      thandiwe.ngema.71 - 2012-09-27 18:21

      Kolobe Spain are two notches below us according to Moody's - they are not at all attractive as an investor destination or as a country to lend money to - look up your facts! We are Baa1 and they are Baa3 according to Moody's!

      christelle.james.7 - 2012-09-27 18:22

      Kolobe, you do not see them impact do you. We cannot say screw them - this affects our economy even more negatively. Why are you so blind. We need investors, be need low borrowing rates. Who are going to create more work - the unemployed. We need money from outside to do that.

      thandiwe.ngema.71 - 2012-09-27 18:27

      http://en.wikipedia.org/wiki/List_of_countries_by_credit_rating

      roi.boss1 - 2012-09-27 18:42

      Let us just that's rich coming from an Indian coz I am yet to see a good Indian and the rumour that's doing the round is that the only good Indian is a dead Indian so help us and go die you Indian Troll. Thieves there I have said wot everyone knows

      claudia.meads - 2012-09-27 18:47

      I have to say Junkyard-dog Julius has the best solution: He will take SA to complete economic freedom, where it is completely free of any economy and then like Zimbabwe, SA will not appear on any of these rating agency's lists - NOW THAT IS ECONOMIC FREEDOM, Juju style..! Then South Africans can love their neighbours so much they can eat them - that will solve the issue of rising food prices as well..! I am beginning to think he is very right after all...

      ansie.b.badenhorst - 2012-09-28 06:29

      WTF.....Who cares? As long as the right peoples coffirs are filled....to hell with everything and everybody else......PITY!

  • christelle.james.7 - 2012-09-27 18:01

    Right ANC and supporters - you don't want to believe us - fine - we understand, we are just little citizens. Will you take THIS seriously. Please read and try and understand!

  • rinus.groeneveld.7 - 2012-09-27 18:02

    Happy now MALenema? You must start worrying that there will be nothing left for your off-shore accounts by the time you become President! You will, in fact, not even be able to borrow money that you can launder!

      ansie.b.badenhorst - 2012-09-28 06:35

      The mines are going to start retrenching....there is no way that are are going to manage all these pay rises with an allready struggling economy. I just hope JUJU will be standing at the gates again to offer them new employment!

  • thandiwe.ngema.71 - 2012-09-27 18:03

    The ANC are making a mess of the economy - we need to cut red tape and be more competitive - VOTE THEM OUT unless you want the lives of the poor to remain in the dumps.

      nigel.vanysendyk - 2012-09-27 18:24

      I like your sentiments Thandiwe, but I feel that too many black people are being brainwashed into supporting either the useless corrupt incompetent ANC Governmeent or the lying popularist demogogue fools, like Malema, who will make Zuma look like a Ghandi, if he ever gets his hands on power. Black people unfortunately are not doing what it takes to lead SA, we have no credible black led opposition, despite gross incompetence, mismanagement & corruption from the current bunch of elite cadres.

      thandiwe.ngema.71 - 2012-09-27 18:30

      I beg to differ. Maimane and Mazibuko of the DA are great young black leaders and fantastic role models. Yes lots of unemployed people like Malema and co, but he is not as powerful as he thinks, otherwise he would have started his own party by now. Change is coming... It will start with PE and Gauteng falling to the DA.

      colin.dovey - 2012-09-27 19:10

      @Thandiwe83 - people like you give me hope for them future of our country!

      pieter.pretorius.106 - 2012-09-28 09:01

      The biggest problem is that the masses are easily bribed and intimidated by the ANC. Even though they see the ANC could not make anything better after 20 years,they still follow them like sheep. The ANC targets the uneducated masses because they know those are the people who can be mislead easily.

  • TshilidziPhuravhathu - 2012-09-27 18:04

    I guess its all down hill from hereon...

  • shirley.steenkamp - 2012-09-27 18:16

    Welcome to the future of S.A. Violent illegal strike,foreign investors heading for the hills,tax money going into tender fraud and staff pockets. This is only the beginning. If I was a potential foreign investor,I wouldnt dream of investing here. I wonder if S.A government ever watch overseas news? Then they would hear what the REAL thoughts of this country are! God help us all.

  • larry.piggott1 - 2012-09-27 18:16

    Not a surprise. The surprise is that they did not do this a long time ago. A combination of being led by Morons, Crooks and an indecisive mod, could only end up in a mess.

  • tatsee - 2012-09-27 18:19

    Ten bucks says the government dosent give a hoot about the downgrade.

      tatsee - 2012-09-28 12:13

      I think Im owed ten bucks!

  • pete.bower.982 - 2012-09-27 18:30

    This was bound to happen. And there are those who would describe it as Afro-pessimism.

  • Zahir - 2012-09-27 18:40

    How will pravin and manuel spin this trying to steer the titanic after u hit the iceberg its a little to late after 20 years

  • kumbulani - 2012-09-27 18:55

    Prophecy being fulfilled. Answers to all of this is in the bible. Like in the days of Noah, Lot, they drank, ate, married, feasted, immoral, confused. The end of the world is cming whilst we busy wondering about all this that shall cme to pass. Seek the Lord while u stil have the chance. Being alive 2day wasnt a mistake or being lucky, bt u were blessed, God gave u a chance to thnk about repenting

  • joe.blogs.98837399 - 2012-09-27 19:00

    Well there you have it. The ANC and Cadre deployment has failed. APPOINT THE BEST PERSON FOR THE JOB. http://endaffirmativeaction.co.za

  • matieu.tzouves - 2012-09-27 19:15

    Rome is burning and the ANC fiddles! Zuma (nope, cannot call you President as you don't act like one), what are you going to do about this slide to oblivion? Oh, I forgot, letting strikers cause havoc by disrupting traffic and threatening people that are wanting to work is the African way! Letting people steal taxpayers money without any consequences is the African way! Well, guess what? we need the rest of the world more than they need our African way. So, you and your cronies need to shape up fast or there will be nothing left to govern/steal from.

  • glen.e.huysamer - 2012-09-27 20:23

    Simple solution.....no borrowing lend, no importing..... export slow down export of natural resources, and free up taxes, on South African manufactured goods being exported with special tax insentives for factories manufacturing locally. There is lot than can be done to counter this, 1st thing 1st..........end the ANC /Alliance ruling 'farters austerity measures for government employee's let them go on strike and then call in the police to deal with them....

  • struan.g.lloyd - 2012-09-27 20:59

    Great!

  • andre.krige - 2012-09-27 21:43

    Why don't we all continue wallowing in our negativity and misery people? Some people I see thrive off it ! Lets please focus on the positives for once. Nelson Mandela spent 27 years in jail and still walked out with positive things to say. And he made a difference . If everyone in SA carried his philosophy we will see a difference . stop blaming everything around us. maybe some positive things will then happen.

  • lerato.kay.3 - 2012-09-28 00:20

    Remember Moody's gave AAA ratings to more than 46,000 residential mortgage-backed securities between 2000 and 2007, many of which turned out to be worthless. Or the investment grade rating that the agencies gave to Enron until four days before its bankruptcy, or to Lehman Brothers until a few days before its collapse. Many of these ratings were likely influenced by the fees that the credit ratings agencies earned from the institutions whose securities they were rating. And did I mention that Moody's, S

  • lee.bromley.39 - 2012-09-28 08:17

    Suffice it to say I will be voting for the DA. I am fed up watching these Neanderthals fighting over the scraps of South Africans.

  • Tony Becker - 2012-09-28 11:08

    Talk about the Midas Touch in reverse - everything they touch turns to sh*t. In a few short years, a perfectly good economy was taken by idiots and turned into a failed state.

  • Daniel Mah - 2012-09-28 14:33

    how credible are these rating agency by the way

      stephanie.sutherland41 - 2012-09-29 02:06

      Credible enough to scare off international investment which is sorely needed to boost a flagging economy and create jobs in a country in dire need. Jobs create taxpayers, create money to shops, thus the economy is stimulated to grow from a most basic level.

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