S Africa awaits first ratings verdict of Ramaphosa era

Johannesburg

SOUTH Africa will probably escape a junk assessment from Moody's Investors Service this week in the first such verdict on the country's creditworthiness since Cyril Ramaphosa came to power.

The change in leadership last month from the troubled era of Jacob Zuma will allow Africa's most-industrialised economy to cling on to the only major investment-grade rating it has left, according to all 15 respondents in a Bloomberg survey of economists and analysts.

The rand has rallied and business confidence rebounded since Mr Ramaphosa succeeded Mr Zuma as head of the ruling African National Congress (ANC) and president.

The risk of missing budget targets and economic growth stumbling, and the ANC's move to pursue land expropriation without compensation may still jeopardise South Africa's credit ratings.

A move to junk on the rand debt would see the nation fall out of gauges including Citigroup Inc's World Government Bond Index, risking outflows of as much as 100 billion rand (S$10.95 billion).

"We expect the ratings agency to wait to evaluate fiscal performance and policy actions at this time, with any fiscal slippage or populist measures potentially triggering a revisit and potential downgrade later in the year," IHS Global Insight director Bryan Plamondon said.

Moody's put South Africa's foreign- and local-currency ratings on review for a downgrade to junk in November, citing increased economic and fiscal challenges, and is scheduled to make an announcement on Friday.

The company currently assesses the country at one step above speculative grade on both criteria.

A downgrade to junk by Moody's will knock the optimism that's boosted confidence and raised hopes that economic growth can exceed forecasts this year and next. BLOOMBERG