'Downgrading of SOEs could have wide-ranging consequences'
Moody’s has placed five SOEs under review for a downgrade, citing funding challenges faced by the entities.
JOHANNESBURG - Economists say a possible credit rating downgrading of State Owned Entities (SOEs) could have wide-ranging consequences, including funding difficulties and more pressure on the finance minister.
Ratings agency Moody's has placed five SOEs under review for a downgrade, citing funding challenges faced by the entities.
Among the affected SOEs is Eskom, which has described the review as unfortunate given the positive progress it has made in improving its financial profile.
Economist Lesiba Mothata says a downgrade could increase the cost of funding and affect the country.
"If you get more demands coming from SOEs towards fiscal bailouts or fiscal guarantees, it makes sure that ratings agencies will have a very adverse review towards the country."
Economist Xhanti Payi says a reluctance on the part of investors to put money into state owned entities could place more pressure on Finance Minister Pravin Gordhan who is already being looked at to quell investor concerns.
"The more people become pessimistic, the burden falls on him to meet the obligations. So if people stop lending to parastatals, he will have to find the money because the parastatals are important to South Africa's social and economic progress."