South Africans will know by midnight on Friday night whether the country has entered the downward spiral of an across-the-board junk rating of government debt, or won another reprieve.
If Moody’s joins Fitch and S&P Global Ratings in downgrading SA’s rand-denominated government bonds as junk, one outcome will be SA’s removal from the Citi world government bond index — leading to a heavy outflow from the bond market as many fund managers will be obliged to put their money elsewhere.
That outflow could amount to as much as R100-billion.
Moody’s put SA on review in November.
In SA’s favour is a positive reception of February’s budget, by all three of the main rating agencies — something recently reappointed Finance Minister Nhlanhla Nene highlighted during a recent roadshow to convince international investors of the government’s plans to get SA back on track.
Moves under President Cyril Ramaphosa to rein in corruption and state capture — including the suspension of Tom Moyane as commissioner of the South African Revenue Service and the National Prosecuting Authority’s decision to reinstate corruption charges against Jacob Zuma that date back to before he became president — are also signs that things are moving in a positive direction.
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