New measures needed to avoid Moody’s downgrade decision

09 March 2016 

Moody’s decision to place South Africa’s investment rating on a “review for downgrade” should focus government’s mind on doing what it takes to avoid “junk status” for South Africa. 

A ratings downgrade to “junk status” will raise the cost of borrowing, result in capital outflows, lead to further currency weakness, and increase the cost of living for ordinary South Africans.

Moody’s “review for downgrade” decision was prompted by a negative assessment of: 

- our prospects for economic growth, which have been revised downwards from 1.7% to 0.9% in 2016/17; and 

- our commitment to fiscal consolidation, including the containing of rising gross debt, projected to be 50.9% of GDP in 2016/17

To avoid a downgrade by Moody’s, government will have to announce new measures to boost economic growth and demonstrate total commitment to implementing the fiscal consolidation path set out in Budget 2016.

It's a pity the Minister of Finance, Pravin Gordhan, will not be present during the budget debate today to explain what “concrete actions” will be taken to deal with Moody’s "review for downgrade" decision in Parliament.

The Minister is currently abroad on an important investor roadshow aimed at boost confidence in investors who are nervous about a ratings downgrade to "junk status" in South Africa.

Statement issued by David Maynier MP, DA Shadow Minister of Finance, 9 March 2016