NEWS
24/03/2018 06:51 SAST | Updated 27/03/2018 17:20 SAST

Moody's Gives South Africa The Green Light

The country dodged another downgrade on Friday evening, and remains at 'investment grade'.

Getty Images/iStockphoto

In an announcement on Friday night ratings agency Moody's Investors Service said it would keep its assessment of the nation's debt unchanged, placing sovereign debt at above investment grade, and changing the country's outlook to stable.

According to FIn24 If Moody's had downgraded the credit rating on SA's debt, 'the country would have automatically been removed from the Citi World Government Bond Index, forcing asset managers to sell SA bonds. This would have resulted in billions of rands leaving the country.'

The long-awaited outcome of the Moody's decision came about as the result of more transparent and predictable policies under President Cyril Ramaphosa, analysts at Moody's say.

"The recent change in political leadership appears to have halted the gradual erosion of the strength of South Africa's institutions," Moody's analysts Zuzana Brixiova and Marie Diron wrote in the statement.

But the announcement doesn't mean much for the local outlook, analysts told Moneyweb.

"This places us in purgatory, so we aren't going to heaven and we aren't going to hell either," Thabi Leoka, an independent economist in Johannesburg, said by phone before the announcement. "We still have very low growth over the next two years and we still have a revenue shortfall, while already surpassing the spending ceiling and we need to fix all of those, quite significantly, before we we can actually be in a comfortable position regarding our rating."

"The rating action by Moody's demonstrates that South Africans working together can achieve remarkable outcomes," National Treasury said in a statement.