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SA's power problems attributed to Moody's downgrade

Moody’s agency downgraded South Africa's rating by one notch.

Moody's. picture: Facebook.

JOHANNESBURG - South Africa's power problems have featured in a downgrade of the country's credit rating, which has been announced by Moody's agency.

Yesterday, the credit rating agency downgraded South Africa's rating by one notch, but improved its status from negative to stable.

This follows a fresh round of load shedding from Eskom, after a silo collapse at one of its power plants, and three days of localised power cuts in and around Johannesburg.

Energy expert Chris Yellend says Eskom's failure to provide steady electricity impacts on the country's growth, and affects perceptions.

"Investors that would previously have invested in the energy intensive industry have regarded South Africa as an inappropriate destination in view of the shortages."

Economist Chris Hart agrees that South Africa is becoming a less attractive investment destination and says better economic decisions are needed.

"South Africa has been deteriorating slowly. It's like what I call a slow puncture. We are deteriorating in our credit rating and that's since 2008."

Other factors cited by Moody's include the country's poor medium term growth prospects and rising government debt.

This brings South Africa's debt closer to 'junk status', but experts say further downgrades are not likely, given the bump up in rating to 'stable'.