The decision by Moody’s Investors Service to retain South Africa’s international and domestic credit rating at investment grade and the change in outlook to stable is a mark of greater confidence in the country, Business Unity South Africa (Busa) said on Saturday.
On Friday night, Moody's said it had taken a decision to affirm South Africa's long-term foreign and local currency debt ratings at "Baa3" and also to revise the outlook from negative to stable, because previous deterioration of the country's institutions would gradually reverse under a more transparent, predictable policy framework.
"The decision by Moody’s to maintain South Africa’s investment grade rating is an indication that recent developments have paid off,” Busa CEO Tanya Cohen said.
Moody’s decision reflected the positive sentiment that had prevailed as a result of the election of Cyril Ramaphosa as President; along with the cabinet reshuffle that brought credible, tried and tested ministers, such as Nhlanhla Nene and Pravin Gordhan, back to senior positions in cabinet; the overhaul of the boards of South African Airways (SAA) and Eskom bringing in experienced individuals with credible track records; and the steps being taken to root out corruption and deal with state capture, she said.
These changes had found resonance with Moody’s, but would need to be followed by concrete action to ensure accelerated and inclusive economic growth.
Busa commended Moody’s decision and the reasons provided, with particular reference to the three strategic drivers identified by Moody’s as required for inclusive growth and employment, namely:
- Halting deterioration in the institutional framework with reference to changes in political leadership, steps to restore state-owned enterprises (SOEs), and bring confidence to the South African Revenue Service;
- Improved performance and growth prospects evident through exceeding growth projections and greater confidence; and
- Fiscal adjustment plans to stabilise and reduce debt through material cuts in expenditure.
"Busa fully concurred with Moody’s identification of the importance of sustained implementation of structural reforms. Sustained implementation, together with the need to address remaining uncertainties and make hard political choices in relation to policy areas such as land expropriation without compensation, the mining charter, public sector wages, and the state of state-owned enterprises, particularly Eskom, were key," Cohen said.
Busa, on behalf of business, was working alongside government and together with other social partners on a number of the concerns identified by Moody’s. Busa emphasised the importance of certainty and the involvement of business in informing policies that were fit for purpose and would enable businesses of all sizes and sectors, but particularly start-ups and smaller businesses, to expand, employ more people, and contribute to inclusive growth.
Energy policy, to be articulated in the updated integrated resource plan and integrated energy plan, as well as policy pertaining to higher education and training and comprehensive social security needed to be urgently and comprehensively finalised.
The positive sentiment about South Africa’s economy was apparent in meetings with ratings agencies S&P Global and Fitch, as well as with international investors when Busa accompanied the finance minister and the team from then National Treasury on the post-budget International investor roadshow earlier this month.
“This decision bodes well for the country and will surely have a bearing on how other ratings agencies view South Africa as an investment destination – thereby reigniting the virtuous circle of economic recovery, fiscal consolidation, and rising social cohesion identified by Moody’s. The hard work to consolidate the fiscus, bring policy certainty, restore confidence in our institutions, and restore confidence in the economy now lies ahead,” said Cohen.