Moody's assurances no excuse for easing up on reform efforts
We should not be lulled into a false sense of security by the comment yesterday by a top Moody's Investors Service official that the likelihood of this country's credit rating being cut in November is about a third. ''We [put] the probability of a downgrade at less than 50%; closer to around one-third," said Moody's vice-president Zuzana Brixiova.The rand strengthened on her remarks, and with the apparent calming of the political tensions around the future of Finance Minister Pravin Gordhan, but it would be a mistake to assume that the economy is now out of the woods, or that the political respite is permanent.Moreover, Moody's has traditionally taken a considerably more upbeat view of South Africa's prospects than its peers. It has our sovereign credit rating at two notches above speculative, or sub-investment grade, whereas S&P Global and Fitch Ratings, which will also deliver their ratings verdicts later this year, have us at only one notch above ''junk''.Slow growth is a huge problem - Moody's expects GDP to expand this year by 0.2%, and by 1.1% next year - and it is entirely possible that the other two rating agencies will pull the plug if our politics go pear-shaped again, or if there is large-scale social instability.After all, the critical economic reforms we promised earlier this year have yet to materialise, despite the continuing dialogue between business, government and labour.Business has set up a R1.5-billion fund to promote small enterprises but it will be many months before its effects, in terms of cash invested and mentoring of budding entrepreneurs, will be apparent.The promised turnaround of state-owned companies has yet to happen. SAA does have a new board, but President Jacob Zuma's ally Dudu Miyeni is still at the helm and the airline is deeper in debt than we ever imagined.And talks about much-needed labour reforms - crucial to stimulating growth and creating jobs - remain just that, talks.We still have a mountain to climb to create the investor confidence needed to put us back on a sustainable growth path...
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