The global rating agency’s lead sovereign analyst for the country, Lucie Villa, told investors on Tuesday that South Africa was safe from a credit ratings downgrade for the next 12 to 18 months.
Nathan, the founder and chief executive officer of disruptive asset manager 10X Investments, describes the news as a big relief, but also a surprise.
“Quite frankly, we are very fortunate to not be downgraded by Moody’s. Almost every economic indicator is deteriorating, day by day, week by week, month by month. I can’t think of one that is improving. There is also absolutely no meaningful action at a policy level.”
South Africa’s sovereign debt is at Moody’s lowest investment grade, at Baa3, with a stable outlook. Moody’s is the only of the three major international ratings agencies that has not assigned the country junk status.
Many analysts have been expecting a downgrade before the end of the year. A Moody’s downgrade would cause borrowing rates across the economy to rise and trigger billions of rand in outflows.
Nathan said Villa’s statement meant there was some hope that would be avoided altogether. “There seems to be some kind of belief that we will start to do the right things, and we need to back that up.”
He added, however, that this narrow escape should not be seen as a thumbs up.
“Even if they don’t downgrade us, our problems don’t go away. A ratings reprieve does not mean we are going to see higher growth or improved employment figures.”
Nathan said South Africans should also remember that the ratings agencies tended to be a lag indicator, “acting as a sort of last resort, out of desperation even”.
He said he hoped the government would embrace this opportunity and do something meaningful.
“It is hard to think of anything meaningful that has been done in a long time. We have spoken about it being time to stop talking and start doing, yet all we have is more talk,” he said.
“Let’s use this opportunity positively and constructively and start to pay back the faith that Moody’s has shown in us.”
Besides, added Nathan, it was high time to “create economic growth and some prosperity that will benefit all south Africans”.
Moody’s is expected to issue a report on South Africa towards the end of the year after the tabling of the Medium-Term Budget Policy Statement in Parliament.