D-Day: Moody’s may spare South African slide to junk as Zuma clings on

Jacob Zuma - [https://techcentral.co.za/wp-content/uploads/2017/05/jacob-zuma-2160-1120.jpg]

South Africa could escape a further slide to junk status on Friday in the same way the nation’s leader, Jacob Zuma, defeated a parliamentary rebellion and clung onto power – comfortably but not without some sweating.

Moody’s Investors Service is scheduled to release a ratings review two months after it cut the local- and foreign-currency assessments to one level above junk, citing risks to growth and fiscal strength due to the political outlook.

That was after it put South Africa on review for a downgrade following a cabinet reshuffle in which Zuma fired Pravin Gordhan as finance minister, prompting S&P Global Ratings and Fitch Ratings to cut the nation to sub-investment grade.

Policy uncertainty and political turmoil increased in the last two months as the Public Protector instructed changes to the central bank’s mandate, the mines minister published new regulations and Zuma’s defeat of a no-confidence motion in parliament send the rand weaker. South Africa entered a recession in the first quarter.

“The fact that there is no political change or upheaval or unscheduled change of a president, all those are positive,” George Herman, the chief investment officer at Citadel Investment Services in Cape Town, said by phone.

“I don’t think ratings agencies are in the business of taking a qualitative view on the standard of the president. The survival of the president from a ratings point of view is credit-positive.”