South Africa and other sub-Sahara African countries will struggle to borrow in the next decade, according to ratings Agency Moody's. Business Day reported that the ratings agency issued the warning in a report on Tuesday. Most of the region's debt is reportedly expected to mature in the next decade.
Moody's and Standard & Poor's (S&P) are expected to give their assessment of South Africa on Friday.
Business Day reported that S&P is expected to downgrade South Africa's local currency debt rating to junk. This will greatly increase borrowing costs.
South Africa's borrowing requirement is expected to hit the R1-trillion mark in the next three years, according to Treasury.
Moody's reportedly singled out Ghana, Zambia and Gabon as most vulnerable to a sudden loss of access to markets or a rise in borrowing costs, as government debt exceeded 55% of GDP in those countries. South Africa's debt could reach nearly 60% by 2010, Finance Minister Malusi Gigaba recently warned.
Moody's warned that one of the problems was that a significant amount of debt in sub-Saharan Africa was held by foreign investors who tend to see the region as a homogenous group and are likely to do a blanket withdrawal of funds.
Business Tech reported that of the three ratings agencies, Fitch has the country in full junk status. Moody's has South Africa's local and foreign debt one notch above junk status.
Full junk status will reportedly force South Africa out of the World Government Bond Index which could lead to a R100-billion loss in foreign investment.Suggest a correction