Should South Africa’s debt rating be downgraded at the end of the year, there will be a flurry of activity in the country’s capital markets, as investors will need to readjust their portfolios, JSE post-trade and information services director Dr Alicia Greenwood said on Tuesday.
During a panel discussion on the financial and macroeconomic risk outlook for Africa at this year’s Deloitte Africa Risk Conference (ARC), she said companies and the JSE were concerned about the likelihood of a downgrade.
Meanwhile, the panel agreed that the lack of diversification in the continent’s economies remained one of the biggest risks to business and economic growth.
“Our projections for growth in the nonresource-rich but agriculture-intensive economies, are set at 5% to 7%. However, the growth rates for commodities-driven countries are depressed and tend to be below 3%,” Moody’s Investors Service South Africa country manager Sylvia Chahonyo said.
Also speaking at the conference, Deloitte Africa emerging markets and Africa MD Dr Martyn Davies said that oil-propelled economies on the continent, such as Nigeria and Angola, were having their “Lehman moment”, with the oil shock fundamentally shifting the economic trajectory of Africa.
This has created an economic divide on the continent, with investment focus shifting from commodities-driven economies in West Africa, to infrastructure-driven East African economies.
This has also resulted in West African economies shifting gears to slow growth and economic contraction, while East Africa is experiencing “very high” robust growth of 6% plus.
Davies pointed out that there were still a number of risks facing businesses that wanted to do business on the continent, including rising global protection sentiments, eurobonds and Africa’s fiscal blowout, lower-for-longer commodity prices, currencies and captured capital owing to foreign exchange restrictions.