Treasury on rating announcements by Moody’s and S&P’s following recent political developments

06 Apr 2017
National Treasury logo
National Treasury logo
06 Apr 2017

The National Treasury issued a statement on rating announcements by Moody’s and S&P’s following recent political developments. 

"Government notes the sovereign rating announcements by Moody’s and S&P. South Africa currently has R2.2 trillion in public debt. Approximately 10%, or R220 billion of this debt, is denominated and repaid in foreign currency, such as US Dollars and Euros. Yesterday, S&P lowered its credit rating for this portion of our public debt to below investment-grade.

Our rand-denominated debt – which constitutes 90 per cent of the debt portfolio – remains investment-grade rated. Moody’s, which continues to rate government debt two notches above sub-investment grade has indicated their intention to review the rating.

The main reasons for the downgrade and the negative assessment by S&P were:

  • Recent executive changes have put at risk fiscal and growth outcomes.
  • Assessment of contingent liabilities to the state.
  • The view that political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth outcomes more than they currently project.

The decision by Moody’s to initiate a review for downgrade was prompted by the abrupt change in leadership of key government institutions. According to Moody’s, this action has raised questions regarding:

  • Progress on reforms previously identified as essential to sustain South Africa’s fiscal and economic strength, and the effectiveness of South Africa’s policymaking institutions.
  • The more immediate implications for growth and public debt given the potentially negative impact on fragile domestic and external investor confidence."