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Moody's puts SA on review for downgrade

The ratings agency wants to see whether the country can reverse its economic outlook.

Moody's. Picture: Facebook.
Finance Minister Pravin Gordhan,Pravin Gordhan,Moodys,junk status,SA economic outlook
Local Business

JOHANNESBURG – Finance Minister Pravin Gordhan’s says ratings agency Moody's has placed South Africa on review for a downgrade and will visit the country later this month to investigate further. 

Moody's wants to see whether the country can reverse its economic outlook.

Gordhan is currently in America, trying to allay fears over South Africa's economy. 

He's also spent a few days in London, meeting hundreds of investors and rating agencies. 

The minister says as far as Moody's is concerned, It’s make or break time. 

“They currently have South Africa two grades above what we call sub investment grade. They have certain questions in their mind and took this decision last Friday, before we met them. They will be visiting South Africa between 16 and 18 March, to meet various stakeholders and get relevant information that may influence them either not to downgrade us or to downgrade us.”

LISTEN: Good news: Ratings agency, Moody's places downgrade on SA on review

Moody's announced that it's placed the government's bond and issuer ratings on review.

Moody's says this will allow it to assess the likelihood that the decline in South Africa's economic strength will be reversed over the medium term. 

The country has been edging towards a downgrade to junk status, but Moody's says it needs more time to see if this can be averted. 

Moody's cited South Africa's weak economic performance as a risk factor when assigning a negative outlook to the rating in December.

It says the local economy is vulnerable to global domestic and financial market dynamics while also carrying a government debt burden.

Moody's says the review will allow it to assess to what extent government policy can stabilise the economy and restore fiscal strength in the face of heightened domestic and international market volatility. 

During the review, Moody's will assess the likely effectiveness of government's plans, including those contained in the national development plan.

To view the National Treasury's response to Moody's decision, click here

To view Moody's statement, click here.

MINISTER ABROAD

Gordhan says the South African delegation currently in the United States will have to convince foreign markets that the country can grow the economy and create jobs under enormous pressure.

The minister has been joined by officials from government, the business sector and trade unions on the global road show.

So far, they've met with investors and rating agencies in London and are currently in Boston.

Gordhan says they're hopeful the team will be able to inspire confidence.

“We need to prove to ourselves and to them that we’re capable of working together to grow our economy. In New York we’ll be a delegation consisting of government, business and the three Treasury accelerations.”

(Edited by Tamsin Wort)

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