Fin24

Treasury unmoved by ratings downgrade

2012-09-27 22:35

Cape Town - The Treasury was on Thursday unmoved by the credit rating downgrade by Moody's, saying all the reasons the ratings agency cited are already being addressed.

Moody's downgraded South Africa's credit rating by one notch citing concerns about the government's ability to tackle economic problems as well as political jostling.

The Treasury, however, maintained that the issues raised by Moody's were already being addressed through various government programmes.

It also pointed out that "some of the drivers of the downgrade have their roots in the protracted crisis in the Eurozone, South Africa's significant trading partner".

"Government remains committed to taking the necessary measures to lift the growth potential and competitiveness of the South African economy.

"Accordingly, government remains committed to the objectives stated in the 2012 Budget, including: investment in infrastructure to increase the capacity of our networks; strengthening our fiscal buffers by reducing the deficit and stabilizing our debt within the next 2-3 years; instituting a range of measures to improve the competitiveness of the manufacturing sector, including regulatory reforms and a competitiveness; redirecting our exports to countries that show more resilience, such as our continent, China and the rest of East Asia; and Continuing to invest in education and skills development.

"The core of South Africa’s policies remains stable and predictable," the Treasury added in a statement.

Earlier, Investec Asset Management said the Moody's downgrade came as little surprise.

"This downgrade was probably the most expected rating action South Africa has had. Moody's put South Africa on negative watch last November and they have made it well known that it was a serious probability that the downgrade would follow‚" portfolio manager Malcolm Charles said.

The expected impact had already been largely factored in by the market‚ he said.

"It is worth pointing out‚ however‚ that the Moody's rating was one notch higher than that of S&P and Fitch‚ so this downgrade brings their rating in line with the others‚" Charles pointed out.

"This action sends a message that as a country‚ our challenge is to ensure we remain focused on creating an investment friendly environment that creates jobs‚" he added.

Comments
  • claudia.meads - 2012-09-27 22:41

    Unmoved..? Indeed, denial tends to have that effect, on you...

      johan.maree.5036 - 2012-09-28 01:39

      I like how treasury skipped (without blinking) the whole "government's inability and politics" part... underestimated their sneakiness!

      Megala - 2012-09-28 05:26

      The slide in African mediocrity started ages ago and the governments reaction is just more proof. I can kaaskop Zuma saying that he doesnt care about some American rating agency as his friends, the Chinese, will give SA tons of cash for free. Ye, sure thing JZ, and when they do, you gonna have to suck a lot of chinky winky!

      ian.flack2 - 2012-09-28 07:26

      Yeah well, the wheels are about to come off the "gravy train" because of lack of maintenance. So I suppose they will stop the first "band wagon" and all climb aboard, even though it will be obviously overloaded......

      thabo.kubheka.969 - 2012-09-28 07:45

      This goverment is the best

  • Notrax123 - 2012-09-27 23:06

    Are you blind, deaf and illiterate like the two most powerful political figures in this country? Instability, Socio-economic and Political instability in the government are the key driving factors for the downgrade. Read what Moody's say's: 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 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

  • cliff.slabbert - 2012-09-27 23:13

    Nothing moves those who have no idea what is going on and refuse to heed the warnings. It's a bit like the poor guy in Phuket watching the tsunami race towards him and not attempting to run and save himself.

  • fourhundredkg.bobbejaan - 2012-09-27 23:48

    "The core of South Africa’s policies remains stable and predictable," the Treasury added in a statement. Yeah, like "strategic nationalisation" of key industries.

  • lerato.kay.3 - 2012-09-27 23:59

    Remember these are the same credit rating agencies that rated AIG AAA a day before its collapse. These three credit rating agencies were key enablers of the global financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. The crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms. One must always consider these agencies' funding and whose interests they push. The US is always AAA despite its growing debt that looks for now as if it can only be settled by printing money. I take these ratings with reservations, very biased!

      heihachi.mishima.7731 - 2012-09-28 08:39

      spot on!!!!these ratings are meaningless.even now the US economic outlook is bleak and yet they still remain triple A.They are struggling to pay back the interest on their loan, they are gradually debasing their currency which will eventually lead to a stagflation situation and even possible collapse of that currency and yet triple A.to hell Moodys.

  • grant.montgomery.5074 - 2012-09-28 00:49

    I don't know which is more frightening : the moody report or the treasury response to it.

  • peter.fraser.92754 - 2012-09-28 02:38

    Unmoved.....yebo, we have a constipated leadership.

  • rudi.linsleynoakes - 2012-09-28 04:45

    No Surprise my side... You allow unions to 'legalizing an illegal strike’? does this even make sense? It contradicts itself ... It gives people with no understanding on finances and the implications of increased labour costs to companies a chance to earn an extra buck (mind you, not shy 300% increase demands initially at Lomnin?)... Well now look at Anglo, Truck Drivers, and guaranteed more to follow.. Foreign investment will go to an all time staggering low, not necessarily because of the financial implications of this; but by the way these people are conducting themselves – barbarically. Soon to be a state of Anarchy - already Burning buildings, Vehicles, Looting what they can! It all boils down to the care factor - everyone’s in it to line their own pockets with no regard for what ripples this is going to send through our Country, one I was once proud of, and the most beautiful place in the world.. Its SAD, and to put the cherry on the top, justification for this is – due to the oppression which took place before I was born! Give me a break!

  • toofaan.monsoon - 2012-09-28 05:10

    It honestly seems to me that nobody in government has half a clue about where their priorities should lie or they have no idea what the Moody's report means. It's simple : focus on job creation (through education) and encourage investment. Striking till you stop key business and thereby discouraging investment, tainting the image of our country with people on TV every day running around with weapons (and talking crap) and stuffing up our education system (there's no doubt about this) will drop us further. Stop being unmoved and start moving ...Fast.

  • douglas.reid.921 - 2012-09-28 05:53

    Crime capital, corruption capital, murder capital, rape capital etc etc etc. UNMOVED - WHICH MEANS WE DONT GIVE A S##T. 19 years later and no change, just getting worse. R 675 billion lost to corruption? So what? This is Africa, get used to it.

  • croix.mactee - 2012-09-28 05:55

    The 'treasury' will even be 'unmoved' if they got a kick in the gonads.

  • Tshepo Gwamanda - 2012-09-28 06:38

    UNMOVED!!!!! Lol!!! this translate to I don't give a FVCK what the international community thinks!!! Well will see!!! I BET the DA gives Sh*t about the investments and stability of this country!!!! That's why i'm voting DA!! because these airheads in power don't give a fvck!!!!

  • Vince.York - 2012-09-28 06:39

    ZIMBABWE IS ALSO ALWAYS "UNMOVED" especially when it continually stretches out its scrawny black claw for neighbours funds. http://www.news24.com/MyNews24/The-Tokoloshe-20111113 The DA produced its best results ever at the polls, scoring almost a million new voters to take its nationwide tally from 1,931,201 to just under 3,000,000, a growth of 50 per cent. This made it the only party in South Africa to have grown in all three of the most recent elections. http://en.wikipedia.org/wiki/Democratic_Alliance_(South_Africa)

  • ken.grimblegrumble - 2012-09-28 06:46

    'Moody's put South Africa on negative watch LAST NOVEMBER and they have made it well known that it was a serious probability that the downgrade would follow‚" portfolio manager Malcolm Charles said. And what has the Government done to improve the risk in the last 11 months? I'm Personally waiting for a further downgrade

  • andre.vandeventer.16 - 2012-09-28 06:46

    It's time the government acknowledges that there are problems and address the problems. The downgrading is not good because it proves the government can't rule and they are not in control!

  • J.Stephen.Whiteley - 2012-09-28 06:51

    Have a look at Moody's chart for July 2012: countries are credit rated in seven grades (most of Africa is ungraded). 1. The US, Europe, Scandinavia, NZ, Australia. 2. Chile, China, Japan, Botswana, Belorussia, Arabia, Poland 3. SA, Oman 4. Russia, India, Brazil, Mexico, Peru, Namibia 5. Angola, Turkey 6. Argentina, Mongolia, Egypt. Now we know why we are in BRIC.

  • dallas.eckert - 2012-09-28 07:32

    Considering the downward spiral has been so fast,i am surprised that SA was not downgraded much further much faster. We will see what happens next week!

  • Zahir - 2012-09-28 07:32

    The impact will be increased borrowing costs and less investment can treasury please hire me as a consultant at million rand package to explain economics 101 to them fools

  • my10cent - 2012-09-28 07:44

    How would they be moved - they don't even know what it means to be downgraded?

  • dewalds3 - 2012-09-28 07:45

    Denial and Blame. The only two things the ANC are capable of!

  • george.smith.7393 - 2012-09-28 08:06

    Love to read the comments - the actual news we already know the signs of a Banana Republic. Interpreting rating a rating agencies move or move have dealt many Euro countries severe economic blow. South Africa has now moved into the sights of the international arena with the Lonmin shooting and strikes. These issues received plenty coverage in the European coutries and investment will dry-up....even China may not be able to put their money where their mouths are

  • heihachi.mishima.7731 - 2012-09-28 08:25

    Moodys is full of crap though. how can the US still have a investment grade rating when they clearly arent going to be able to pay up in the next 2,3 years.

  • mart.botha - 2012-09-28 10:24

    My biggest concern is the joke that the problems 'were already being addressed through various government programmes'. Ha ha, there are thousands of comedians out of work because funny isn't funny anymore, and now Treasury tries to take to the stage.

  • mohammed.suder - 2012-09-28 13:44

    Ratings agencies are suspect and have their own agendas - http://www.swissinfo.ch/eng/business/Integrity_of_ratings_agencies_questioned.html?cid=33193026

  • adriaan.kroon.1 - 2012-09-30 06:37

    Very difficult under current economic conditions to stay positive!

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