There is an eerie unreality about the debate that has followed Moody’s decision to retain South Africa’s rating at two notches above junk grade status (with a negative outlook).
Moody’s explained its decision on the basis of three principal considerations:
- South Africa’s economic growth is expected to recover after reaching its trough in 2016 – based on the prospect of closer collaboration between government, business, labour and civil society in restoring confidence in the economy and addressing the constraints to economic growth;
- following the 2016 budget, it is expected that general government debt to GDP will be stabilised under the direction of the Treasury – which has a reassuring fiscal track record; and
- Moody’s was impressed by South Africa’s institutional strength compared to its peers – no doubt a reference to the roles played by the Constitutional Court, the Public Protector and civil society in the recent “spy tapes” and Nkandla judgments, and in the Nene affair.