Dodged the bullet, for now
The rating agencies have spoken and Moody’s was the surprise, leaving South Africa’s rating unchanged at two notches above junk with a negative outlook. Fitch dropped us to negative outlook at one notch above junk, and Standard & Poor’s (S&P) dropped the local rand debt rating to one notch above junk and negative outlook, while the offshore rating was left unchanged at just above junk and negative. In short, we avoided junk status; something I did not think we would achieve, and now all attention turns to 2017. All the agencies commented on stateowned enterprises and political issues while also highlighting a lack of GDP growth. The risks have not gone away and, importantly, when placed on negative outlook, the agency either needs to drop the rating or make us stable within two years. So, we’ll be watching the June and December updates from S&P. I think the risks of a drop to junk remain real, but maybe the odds have shifted to even, rather than my 2016 view that the odds favoured a drop to junk from S&P.