SA is resilient - National Treasury on Moody's review

South Africa is a resilient country that is working to demonstrate its commitment to translate plans into concrete actions‚ the National Treasury said on Wednesday.

The statement comes as Moody’s Investors Service placed South Africa’s long and short term ratings of “Baa2” and “P-2”‚ respectively‚ on review for a possible downgrade.

The credit ratings agency will visit South Africa for its annual review from 16-18 March 2016.

“This review visit will primarily serve to either affirm the current ratings or downgrade them. Moody’s currently rates South Africa two notches above sub-investment grade for foreign currency debt‚” National Treasury said in a statement issued by the government news service.

The rand was weaker against the dollar on Wednesday morning on the news about Moody’s. At 8.32am the rand was at R15.4561 against the dollar from R15.4401 previously. Against the euro‚ the rand was at R16.9730 from R17.0013 previously. It was at R21.9350 against the pound from R21.9515.

“Moody’s yesterday initiated a review to downgrade SA‚ mainly motivated by moderate to weak economic strength and susceptibility to event risk. The downgrade may very well come as a direct result of a failure to reverse the debt ratio and a perceived lack of willingness towards fiscal restraint‚” said Rand Merchant Bank analysts.

The Treasury said that during the visit‚ Moody’s would assess the views of various stakeholders in government‚ civil society‚ labour and in the private sector on a number of areas including whether:

- the decline in South Africa’s economic strength will be reversed in the medium term;

- if sufficient progress can be made to stabilise and restore fiscal strength‚ and

- if policy is likely to lead to a reversal in the continuing erosion of government’s balance sheet.

 “As a resilient nation‚ we are working together — civil society‚ labour‚ business and government to demonstrate our commitment to translate our plans into concrete actions‚” said Treasury.

In its meetings with the agency‚ National Treasury will highlight the:

- country’s collaborative actions aimed at accelerating inclusive growth;

- measures adopted in the 2016 Budget to accelerate fiscal consolidation and to give effect to the National Development Plan;

- steps taken to reinforce stable industrial relations;

- accelerated implementation of the R870 billion infrastructure investment programme;

progress made in resolving energy constraints‚ and

- initiatives taken to implement the recommendations of the Presidential Review Commission on state-owned companies to strengthen their governance‚ financial oversight and their contribution to achieving SA’s developmental goals.