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No silver bullet to stop another downgrade, says Gigaba

Apr 13 2017 16:03
Liesl Peyper

Cape Town – There are no silver bullets or guarantees that will stop Moody’s from downgrading South Africa in the coming weeks, but government is engaging directly with the ratings agency, assuring them of the country's commitment to fiscal discipline and consolidation, said Finance Minister Malusi Gigaba. 

Speaking to the media on the sidelines of a question and answer session with local investors at Parliament, Gigaba said he and officials from National Treasury will represent South Africa at the spring meetings of the World Bank and International Monetary Fund (IMF) in Washington next week. 

Gigaba and his entourage will also use the opportunity while in the US to meet with international investors and ratings agencies Standard & Poor’s (S&P) Global Ratings and Fitch, which cut South Africa’s sovereign credit rating to junk status last week. 

Moody’s is the last of the three major ratings agencies that has South Africa at investment grade (two notches above junk status). It intends to review the country’s credit rating within the next 30 to 90 days. 

READ: No turning point yet for rand, SA assets - researcher 

Should Moody’s downgrade South Africa by two notches to sub-investment grade, South Africa could be expelled from the World Government Bond Index, which will have serious consequences for government bonds and the country’s credibility as an investment destination. 

“It’s important to reassure ratings agencies and investors in light of what happened,” Gigaba said. “We’re telling them we will continue on the fiscal path adopted and presented during the 2017 Budget.” 

READ: Gigaba assures investors govt won't spend what it doesn't have 

Gigaba also acknowledged the importance of meeting with South African domestic bond holders who have 60% of South African bonds. “They need to be reassured that we as government take the ratings downgrade seriously and that we understand the implications for government, investors, ordinary South Africans and businesses.” 

The minister said he and National Treasury along with stakeholders from business, labour and civil society organisations will soon embark on a separate investor roadshow to North America, Europe, Asia and Eastern Europe to have talks with bond and equity investors there. 

Gigaba said he was heartened by the show of willingness from the various stakeholders to "act as one" in addressing the challenges faced by the country. 

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