South Africa doing well if you strip out growth, Moody’s Says

JOHANNESBURG (Capital Markets in Africa) – South Africa measures favourably in most indices bar economic growth, which the Treasury has forecast will be 0.5 percent this year, a Moody’s representative said on Tuesday.

Moody’s rates South Africa two notches above sub investment grade with a negative outlook and is due to publish its next review in December. Fellow ratings firms S&P’s and Fitch have the country just a step above junk.

The three agencies have warned that increased political infighting along with slowing growth could trigger downgrades.

“South Africa is doing relatively well in a lot of the indices when you strip out growth … and when we look at a sovereign rating you’ve got to look through the cycle,” Moody’s country representative Sylvia Chahonyo told a business conference.

At his budget speech last week Finance Minister Pravin Gordhan called for an end to “political noise” to help the economy recover and avoid downgrades.

The state prosecutor on Monday dropped fraud charges against Gordhan, executing a U-turn in a case that has rattled financial markets and drawn accusations of political meddling.

Investors have worried that Gordhan – who had brought some stability to South African markets since returning to the post during a currency crisis in December last year – would be removed from his job if he was prosecuted.

Supporters of Gordhan and sympathetic financial analysts say all the charges could be a ploy by President Jacob Zuma and his allies to discredit a finance minister who stood in the way of their securing access to lucrative government contracts.

The president has denied that he is in conflict with Gordhan.

Deloitte’s Managing Director for Africa and Emerging Markets, Martyn Davies, told the conference that with Gordhan still at the helm, Africa’s most industrialised country would avoid downgrades by the “skin of our teeth”.

Source: Reuters Africa News