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Moody’s: Close SA election could boost reforms, increase state spending

SA’s central bank predicts the economy will record 0% growth in 2016 and only narrowly avoid a recession.

 Picture: Reinart Toerien/EWN

JOHANNESBURG - South Africa could see faster implementation of much-needed reforms to revamp the ailing economy following fiercely contested local government elections but also risks a rise in spending pressures, ratings firm Moody's said on Friday.

"Increased political competition, as indicated by South Africa's local election results so far, has the potential to boost reform momentum in the run-up to the 2019 national elections," Moody's said in a statement.

"Over the medium to longer term, this would indicate a shift from redistributive policies towards more growth oriented economic management and effective service delivery."

South Africa's central bank predicts the economy will record zero percent growth in 2016 and only narrowly avoid a recession, and Treasury has been trying to cut support to debt-ridden state firms and rein in a wide deficit.

Moody's rates the country's debt two levels above speculative grade but with a negative outlook, a higher rating than of the other two major agencies.

The ruling African National Congress party looked on its way to its worst electoral performance since the end of white-minority rule as voters vented anger about high unemployment and corruption in Africa's most industrialised country.