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Moody's Rating: Life-Saver to South Africa's Economy?

Global Market	991 VIEWS
Global Market
991 VIEWS

Friday, November 08, 2019 / 03:00PM / United Capital Research / Header Image Credit: City Press

So far, the South African economy has remained under pressure in 2019, amid faltering output growth, massive inequality, rising unemployment, and power sector crisis. This remains a major concern for investors, as the economic outlook for the country seems rather melancholic. Despite President Cyril Ramaphosa's economic stimulus and recovery plan launched in Sept 2018, Q1-19 annualized GDP growth sank to a new low since the financial crisis, down in the negative region at -3.2%.

Recently, the South African rand and government bonds surged after a renowned global rating agency, Moody's, kept the country's investment grade credit rating, with South Africa's sovereign debt rating at Baa3. However, the rating agency revised the outlook for the economy from 'stable' to 'negative', implying deterioration in economic growth and rising debt as alarming issues. The negative outlook signifies that there is a cover of 12-18 months, in which a downgrade could be delivered. Nevertheless, Moody's made it clear that a credible budget statement in Feb -2020 would be crucial in maintaining the current rating.

In our opinion, South Africa must hasten the pace of reforms, in order to strengthen investors' confidence, avoid massive outflows of funds and the potential increase in costs of debts, should investors price in these growing risks.

Top African Stories

S.Africa manufacturing, business confidence falls take shine off investment drive: South Africa's manufacturing contracted by more than expected and business confidence tumbled in data released on Thursday, casting further doubt over the economy a day after President Cyril Ramaphosa secured $24 billion of investment pledges. Read more

Kenya's president finalises removal of rate cap for banks: Kenya's President Uhuru Kenyatta has signed a law that scraps a cap on banks' commercial lending rates which had been blamed for stalling lending to businesses, his office said on Thursday. Read more

Ivory Coast seeks oil majors as it opens oil & gas licensing round: Ivory Coast wants more explorers for oil and gas as it seeks to boost economic growth, according to Energy Minister Abdourahmane Cisse. Read more

South Africa Makes Headway in $100 Billion Investment Drive: South African President Cyril Ramaphosa said his administration is on track to lure $100 billion in new investment within five years, with more than $16 billion already committed and many more projects in the pipeline. Read more

Angola to name licensing winners in April, new round in Jan: Angola expects to announce the winners of its 2019 oil and gas licence auction round in April as part of a multi-year plan to boost declining output, a senior executive at the National Agency of Petroleum, Gas and Biofuels (ANPG) said on Thursday. Read more

Central Bank Of Nigeria Automates Nigerian Export Proceeds Form ("Form NXP") For Commercial Exports: The Central Bank of Nigeria, pursuant to powers conferred on it by the Foreign Exchange (Monitoring & Miscellaneous Provisions) Act, 1995 to issue guidelines regulating export and import trade transactions in collaboration with relevant governmental entities, issued a circular tagged Automation of Form on the Trade Monitoring System. Read more

Looking Forward

Angola

Oct-19 Consumer Price Index - November 12th

Oct-19 Net Reserves - November 17th

Ghana

Oct-19 Consumer Price Index - November 13th

Sep-19 M2 Money Supply YoY - November 17th

Kenya

Sep-19 Overseas Remittances - November 15th

Nov Benchmark Interest Rate - November 25th

Senegal

Oct-19 Consumer Price Index - November 15th