SA backed by Ja­panese agency

Afro Voice (National Edition) - - SPORT - BERNARD SATHEKGE bernards@the­newage.co.za

THE largest credit rat­ing agency in Japan, R&I, yes­ter­day an­nounced that it has reaf­firmed South Africa’s long­term foreign cur­rency debt rat­ing at BBB and lo­cal cur­rency debt rat­ing at BBB+, an in­di­ca­tion that the coun­try’s re­forms are on the right track.

Lo­cal cur­rency bor­row­ing makes up about 90% of the SA’s to­tal R2.2 tril­lion of debt.

SA has avoided a cut to junk and re­tained its place in the Citi’s World Govern­ment Bond In­dex (WGBI), the big­gest of the global bench­marks and tracked by about $2­3 tril­lion of funds.

The R&I an­nounce­ment fol­lows hot on the heels of Moody’s de­ci­sion last month which also af­firmed SA’s in­vest­ment­grade credit rat­ing and re­vised its credit out­look to “sta­ble from neg­a­tive”.

Moody’s said that the pre­vi­ous weak­en­ing of na­tional in­sti­tu­tions was grad­u­ally rev­ers­ing which sup­ported an eco­nomic re­cov­ery.

R&I as­signs rat­ings to about 700 Ja­panese en­ti­ties and it has also re­vised SA’s out­look to sta­ble from neg­a­tive.

The good news is that the R&I ac­tion no­tably con­firms the coun­try’s sov­er­eign as an in­vest­ment grade credit.

The Ja­panese agency said the rat­ings af­fir­ma­tion re­flects the im­proved growth per­for­mance and prospects, fis­cal ad­just­ment plans in the 2018 Bud­get that would sta­bilise debt bur­dens and changes in the ad­min­is­tra­tion that are ex­pected to help erad­i­cate pol­icy un­cer­tainty.

Fur­ther, the agency noted that the po­lit­i­cal sit­u­a­tion in SA con­tin­ues to en­tail some pol­icy risks that war­rant at­ten­tion, but cau­tioned that in or­der to unify the ANC, it would be es­sen­tial for Pres­i­dent Cyril Ramaphosa to re­store party strength and meet re­form ex­pec­ta­tions.

In re­sponse to R&I, the na­tional Trea­sury said it wel­comed the de­ci­sion, and that, go­ing for­ward, the coun­try aims to im­prove its in­vest­ment and eco­nomic prospects.

“The govern­ment con­tin­ues to work dili­gently on prac­ti­cal steps to pro­vide the nec­es­sary pol­icy cer­tainty such as the fi­nal­i­sa­tion of min­ing leg­is­la­tion.

“The rat­ing ac­tion by R&I demon­strates that South Africans work­ing to­gether can achieve re­mark­able out­comes,” the Trea­sury said.

An­a­lysts said the ad­just­ment from neg­a­tive to sta­ble gives some hope for the coun­try, as well as the abil­ity to bor­row again on in­ter­na­tional mar­kets, but the new po­lit­i­cal lead­er­ship must make sure that they carry on with the coun­try’s mo­men­tum and not al­low it to slip along the way.

The first quar­ter Pol­icy Un­cer­tainty In­dex (PUI) pub­lished by the Univer­sity of North West Busi­ness School, lead by Prof Ray­mond Par­sons, also painted a “sweet” pic­ture as the in­dex fell sharply to 49.6 com­pared to 55.4 in the fourth quar­ter of 2017.

Par­sons said the lat­est de­cline in the PUI is the out­come of a com­bi­na­tion of favourable po­lit­i­cal and eco­nomic fac­tors over the past three months which have helped to ame­lio­rate po­lit­i­cal and pol­icy un­cer­tainty.

“The global eco­nomic out­look re­mains broadly sup­port­ive of the SA econ­omy, and the ten­ta­tive eco­nomic re­cov­ery of last year has now broad­ened into a more gen­er­alised up­turn, with higher lev­els of busi­ness and con­sumer con­fi­dence now also re­flected in the lower PUI.

“A growth rate of about 2% is pos­si­ble for SA in the short term.

“The pos­i­tive as­sess­ment from credit rat­ings agen­cies is also a tes­ti­mony that the coun­try’s path to re­forms is on the right track.”

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