Finance Minister Tito Mboweni Mboweni on Saturday said that the decision by Moody’s to cut South Africa’s credit rating below investment grade could not have come at a worse time as the country, like other countries, is battling the outbreak of Covid-19.
Mboweni said the sovereign downgrade will further add to the prevailing financial market stress.
“It is with a heavy heart to note that all three major credit ratings agencies currently rate South Africa at sub-investment grade,” Mboweni said.
The rating review by Moody’s means all three big rating agencies including Standard and Poors, Fitch Ratings have deemed South Africa’s credit rating as junk.
This comes as the country, which has become the epicenter of Coronavirus in Africa, has registered its first death and reached over 1000 infections.
The presidency announced that President Cyril Ramaphosa, who has interacted with a range of stakeholders, has tested negative. Those he interacted with include African Christian Democratic Party leader Kenneth Meshoe, who has since tested positive for Covid-19.
The decision by Moody’s, in the middle of an already slowing economy, become one of the many crises that Ramaphosa’s administration must handle.
Moody’s, in a statement, said the key driver behind the rating downgrade is the continuing deterioration in public finances and weak economic growth, which the agency said it does not expect “current policy settings” to address effectively.
“The South African government faces a continued deterioration in fiscal strength, structurally very weak growth and a debt burden that is set to rise even faster and to higher levels than we had previously expected,” Moody’s said.
“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will further exacerbate South Africa’s challenges.”
The rating agency also warned that South Africa’s debt to GDP might reach 91% by 2023.
Economist Thabi Leoka said: “Moody’s downgraded South Africa based on our fundamental weakness and not because of Covid-19.”
Mboweni said the economic crisis must not be put to waste: ”Every crisis presents an opportunity.
The opportunity we have today is to unite and work together to address our challenges. We as a people have overcome insurmountable challenges in the past and we can still overcome. We shall rise. We have to rise. We owe it to ourselves.”
