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Nedbank Sees Ratings Downgrades Ahead, but Not Just Yet

SOUTH AFRICA
  • Nedbank on upcoming ratings assessments by agencies in May ( S&P, Fitch & Moody's)
  • Nedbank says the balance of factors points to imminent rating downgrades deeper into sub-investment grade, but said rating agencies are likely to hold off until the public sector and Eskom wage talks have been finalised.
  • "S&P & Fitch will be reluctant to move a country with reasonably solid institutional governance and deep local financial markets below the psychological hurdle of a B rating.
  • "This hesitancy is likely to delay further downgrades for at least a year. Moody's and Fitch downgraded their ratings in Nov 2020, which may persuade them to adopt a 'wait-and-see' at least until the 2022 budget.
  • "However, a deterioration of economic prospects would increase the chances of further downgrades during this year."
  • To improve its rating, Govt must tackle longstanding macroeconomic challenges head-on. First, stabilise government finances.
  • "Second, restore SOEs to good financial health to reduce the burden on the fiscus and the risks posed by the high contingent liabilities.
  • Third, eradicate power shortages by stabilising Eskom and prioritising the licensing of renewable power projects.
  • "These three steps will lift confidence, facilitate greater fixed investment by the private sector and ultimately stimulate job creation, Nedbank said.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News

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