Last fall, S&P cut the rating on South Africa’s sovereign debt from investment grade to junk status, and Moody’s began a formal review to consider a parallel downgrade. Late on Friday, March 23, however, Moody’s reaffirmed South Africa’s investment-grade status and changed its outlook to stable.
This has significant implications for emerging-markets investors. Moody’s decision constitutes a strong vote of confidence in the rapid-fire actions by the country’s new president, Cyril Ramaphosa. As Moody’s explained: “The confirmation of South Africa’s rating represents Moody’s view that the previous weakening of South African institutions will gradually reverse under a more transparent and predictable policy framework.”
We agree with Moody’s decision to support the governmental initiatives taken by Ramaphosa — an unique politician with historic trade union roots and extensive experience as a company executive. He is quickly building the foundation for a better investment environment in South Africa, although he imminently faces the extremely difficult challenge of land reform.
Here is a brief chronology: On December 17, 2017, Rampaphosa won a closely contested election to head the African National Congress (ANC), the dominant political party in South Africa. Then, on February 15, Rampaphosa was elected the president of South Africa, replacing Jacob Zuma. On March 16, national prosecutors filed a criminal suit again Zuma, including charges of corruption, money laundering and racketeering. Read More