26/03/2018 06:38 SAST | Updated 26/03/2018 08:14 SAST

Treasury: Moody's Decision Has Given Government 'A New Lease On Life'

Treasury says government must take advantage of the opportunity presented by Moody's decision to upgrade the country's outlook to stable.

Brendan McDermid / Reuters

Government has a "new lease on life", thanks to the positive decision by ratings agency Moody's to upgrade the country's outlook to stable, Treasury has said, and government departments must not waste the opportunity, Business Day reported on Monday.

South Africa managed to avoid a third junk rating on Friday, when Moody's kept its assessment of the country's debt unchanged, according to MoneyWeb. South Africa's outlook was also revised from negative to stable, with a nod to what investors see as more amenable policies presented by President Cyril Ramaphosa.

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

Treasury director-general Dondo Mogajane told Business Day on Sunday that he would ensure that government departments looked at what each one could do to take advantage of what Moody's said.

"Now that we are on stable outlook we have a new lease on life and the opportunity to make a new set of commitments. I am going to push for people to say, 'Let's implement what they (Moody's) say we should do to take us up in terms of the rating, but also ask what we should stop doing that would take us down to negative again'," he reportedly said.

Mogajane reportedly told Business Day that the message from Moody's was that South Africa was starting to move in the right direction. He pointed to the policy reforms outlined by Treasury during the February budget review, saying these reforms had the potential to raise potential growth and reduce the country's debt.

According to Fin24, had Moody's downgraded South Africa, the country would have been removed from the Citi World Government Bond Index, forcing asset managers and pension funds to sell South African bonds. This would have raised the cost of debt.

Among the reasons cited by Moody's for its decision are changes to Treasury, Sars and state-owned entities, Fin24 reported. The ratings agency reportedly said, "the speed with which President [Cyril Ramaphosa] has moved to replace the leadership in key institutions, including the ministries of finance, mineral resources and public enterprises and most recently in Sars, illustrates the resolve to address the problems of the recent past and to set the state, society and the economy on a new and positive path".

Business Leadership South Africa (BLSA) also warned that South Africa should not be complacent in the wake of the Moody's announcement. According to Eyewitness News, BLSA CEO Bonang Mohale said the announcement was an opportunity for the country to address its socioeconomic challenges.