REPUBLIC OF SOUTH AFRICA - Moody's rating action on South Africa foreign and local currency ratings

Moody's rating action on South Africa foreign and local currency ratings

national treasury
Department:
National Treasury
REPUBLIC OF SOUTH AFRICA
Private Bag X115, Pretoria, 0001. Tel: (+27 12) 315 5944. Fax: (+27 12) 407 9055




                          SENS ANNOUNCEMENT
RECENT RATING AUCTIONS

On 9 June 2017, Moody’s Investors Service (Moody’s) downgraded South Africa’s long-term
foreign and local currency debt ratings to ‘Baa3’ from of ‘Baa2’. The negative outlook remains
unchanged.

According to the rating agency, the downgrade was driven by:

   -   The weakening of South Africa’s institutional strength;
   -   Reduced growth prospects reflecting policy uncertainty and slower progress with
       structural reforms; and
   -   The continued erosion of fiscal strength due to rising public debt and contingent liabilities.

Further, Moody’s said the negative outlook reflects the continued downside risks for growth
and fiscal consolidation associated with the political outlook. Over the medium-term,
economic and fiscal strength will remain sensitive to investor confidence and hence
uncertainty surrounding political developments, including prospects for structural reforms
intended to raise potential growth and flexibility in fiscal expenditures.

Government notes Moody’s decision and reiterates that policy transparency and continuity
remain on top of government’s agenda and the ruling party in 2017. The outcomes of the
conferences of the African National Congress in June and December 2017 are not expected
to translate to policy changes. The publicly announced draft policies should cement concerns
of policy deviations in the next five years. Furthermore, the Minister of Finance will ensure
that the joint work of government, business, labour and the civil society continues at a faster
pace. The commitment is on improving investor and consumer confidence through fast-
tracking the implementation of the structural reforms on economic growth.

The foundation for higher growth paths and socio-economic development has already been
made:

   -   The National Development Plan continues to anchor all policies of government;
   -   The 9 Point Plan has been approved as catalyst for growth in the immediate horizon,
       and is being implemented;
   -   Reforms to address the structural challenges that limit the economic growth potential
       are already being implemented and progress has been made, especially labour
       reforms; and
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   -   Reforms to address governance and financial weaknesses besetting the state-owned
       companies are being implemented.

For further enquiries contact:

13 June 2017 

L Madiba
Director: Country Risk Management
012 315 6514

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