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Treasury, banks to woo US investors ahead of ratings move

Sep 15 2016 10:52
Arabile Gumede

Johannesburg - National Treasury, the Johannesburg Stock Exchange and major banks will meet with investors in the US next month as rating companies prepare to review the nation’s creditworthiness.

The Treasury, the JSE, UBS Group, Old Mutual and Standard Bank Group “are leading a high-level government, business and labour delegation” to New York on October 4 and 5, the stock exchange’s Director of Marketing and Corporate Affairs Zeona Jacobs said in an emailed response to questions on Wednesday.

“The goal of the investor conference is to engage US-based investors making it clear that South Africa is open for business.”

Finance Minister Pravin Gordhan led a delegation of business and labour leaders to meet with investors and rating companies in the UK and US in March to boost confidence in an economy forecast to expand at the slowest pace this year since a 2009 recession.

While the nation was spared credit-rating downgrades by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings earlier this year, news last month that Gordhan has been summoned by the police hit the rand and bonds.

Ratings companies will start to visit South Africa “in a short while”, Gordhan said in an interview with Johannesburg-based CNBC Africa on Tuesday.

S&P, which rates South Africa’s debt at BBB-, the lowest investment-grade level, is due to release its next review on December 2. Fitch has a similar assessment and Moody’s rating is one notch higher. There is a risk that the ruling African National Congress could turn to a more populist approach to address rising voter dissatisfaction after its worst election performance since Nelson Mandela led the party to power in 1994, Fitch said after the August 3 local government vote.

A downgrade of South African sovereign debt to junk could spark a wider emerging-market selloff and lead to a 10% drop in the rand against the dollar, Lutz Roehmeyer, a money manager at Landesbank Berlin Investment, which oversees about $12bn of assets, said on September 9.

The currency weakened 0.2% to R14.3534/$ on Thursday morning. Yields on rand-denominated government bonds due December 2016 rose one basis point to 8.69%.

Gordhan, 67, was reappointed in December to the role he held from 2009 to 2014, halting a plunge in the rand and bonds, which was caused when President Jacob Zuma fired Nhlanhla Nene as finance minister and replaced him with a little-known lawmaker. Gordhan will present the mid-term budget to lawmakers in Cape Town on October 26.

Treasury’s acting spokesperson Yolisa Tyantsi confirmed by phone Gordhan will visit New York early next month.

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