Moody’s Signals its Confidence in Ramaphosa With Credit Rating

Moody’s Investors Service kept South Africa’s credit rating at investor grade, though it is still only one notch above junk, and changed its outlook for the country to stable. For comparison, Moody’s rating for South Africa is about the same as its ratings for Romania and Indonesia. Still, Moody’s narrative is positive, reflecting its “view that the previous weakening of South Africa’s institutions will gradually reverse.” It sees “significant growth potential” for the economy, though it cautions that the Ramaphosa administration is “still to be tested.” Moody’s also praised the cabinet and personnel changes made by the new president.

Essentially, Moody’s is applauding the end of former President Jacob Zuma's administration and its erratic economic and fiscal policies. The ANC, led by Ramaphosa, removed Zuma from the presidency in January, and in a cabinet reshuffle, the new president replaced many of Zuma’s crony appointments with seasoned professionals. Zuma’s most notorious associates, the Gupta brothers, are now subject to prosecution.

Since 2014, South Africa’s economic growth has not reached 2 percent. Improved investor confidence in the Ramaphosa government, it is to be hoped, will encourage more domestic as well as foreign investment, resulting in higher levels of growth. For now, at least, the signs are favorable. The rand is continuing to climb, reaching 11.84 per U.S. dollar today. Yields on the nation’s local-currency government bonds due in December 2026 were steady at 7.9 percent, according to Bloomberg, though the stock market was down at the start of the week. 

Still, Finance Minister Nhlanhla Nene cautioned against complacency. The S&P’s rating is due on May 25 and South Africa will have to show tangible improvements if it is to maintain or improve its credit rating.