South Africa stuck in low-growth trap - Moody's

Swazi Observer - - BUSINESS -

JO­HAN­NES­BURG - South Africa is stuck in a low-growth trap and is at risk of an­other down­grade if the gov­ern­ment doesn’t im­ple­ment struc­tural re­forms‚ ac­cord­ing to Moody’s Vice Pres­i­dent and se­nior sov­er­eign an­a­lyst Zuzana Brix­iova.

Speak­ing at the Moody’s summit in Jo­han­nes­burg on Wed­nes­day‚ Brix­iova said: “In­vestors have such low con­fi­dence that they don’t in­vest be­cause of the low-growth en­vi­ron­ment.”

Amid fears of an­other down­grade‚ Brix­iova said there were pos­i­tives and neg­a­tives but “on bal­ance‚ the risks are tilted to the down­side.”

SA could be at risk of an­other down­grade if the strength and in­de­pen­dence of in­sti­tu­tions would no­tably di­min­ish; if the emerg­ing pol­icy frame­work has be­come even less pre­dictable or un­der­mined eco­nomic or fis­cal strength; and if liq­uid­ity pres­sures be­gin to reemerge at sta­te­owned en­ter­prises (SOEs) that would elicit pro­nounced gov­ern­ment in­ter­ven­tion.

Brix­iova‚ added‚ how­ever‚ that SA’s out­look would im­prove if the gov­ern­ment were to im­ple­ment poli­cies and re­forms that in­di­cated the con­tin­ued in­de­pen­dence and strength of pol­icy in­sti­tu­tions; en­hanced medi­umterm growth and sta­bilised the gov­ern­ment’s debt bur­den; and led to a de­cline in the value of guar­an­tees to SOEs.

“It de­pends on what the struc­tural re­forms are‚” ex­plained Brix­iova.

“There is a grad­ual ero­sion of in­sti­tu­tional frame­work. Cur­rently the SARB (SA Re­serve Bank) is un­der pres­sure with ques­tions around its man­date.”

She also out­lined low growth and high un­em­ploy­ment and the ac­cu­mu­la­tion of pub­lic debt and con­tin­gent li­a­bil­i­ties “which have al­most dou­bled since 2008”.

In June‚ Moody’s cut the lo­cal and for­eign cur­rency as­sess­ments to one level above junk with a neg­a­tive out­look‚ cit­ing risks to growth and fis­cal strength due to the po­lit­i­cal out­look.

SA is cur­rently rated at Baa3 neg­a­tive. Sowe­tan­live

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