Moody's Investors Service today confirmed South Africa's Baa2 long-term government bond and issuer ratings as well as its (P)Baa2/(P)P-2 shelf and MTN program ratings, and assigned a negative outlook. The rating actions conclude a review for downgrade that commenced on March 8, 2016.
The confirmation of South Africa's ratings reflects Moody's view that the country is likely approaching a turning point after several years of falling growth; that the 2016/17 budget and medium term fiscal plan will likely stabilize and eventually reduce the general government debt metrics; and that recent political developments, while disruptive, testify to the underlying strength of South Africa's institutions.
The negative outlook speaks to the implementation risks associated with the structural and legislative reforms that the government, business and labor recently agreed in order to restore confidence and encourage private sector investment, upon which Moody's expectations for growth and fiscal consolidation in coming years -- and hence the Baa2 rating -- rely.
In a related move, Moody's also confirmed the Baa2 rating of ZAR Sovereign Capital Fund Propriety Limited, a special purpose vehicle whose debt issuance is ultimately the obligation of the South African government, and assigned a negative outlook.
Moody's made no changes to South Africa's local or foreign currency country ceilings, which remain at A1 for local currency debt and deposits, A2/P-1 for foreign currency debt and Baa2/P-2 for foreign currency bank deposits.
