South Africa dodges downgrade despite Eskom debt

Jamie McKane

MyBroadband Journalist
Mar 2, 2016
South Africa dodges downgrade despite Eskom debt

Investors may be forgiven for wondering what’s taking Moody’s Investors Service so long to downgrade South Africa to junk.

Financial markets have been pricing in a downgrade for months, and the two other major rating companies have had South Africa on junk for two years.



Honorary Master
Jul 11, 2005
There is a false sense of comfort that has swept through the political and part of the financial circles following Moody’s comments that there is a low probability of a credit rating downgrade over the next 18 months. A credit rating downgrade was never a high probability in 2019 but a change in outlook from stable to negative was. That has not changed, I believe Moody’s will likely change the outlook to negative from stable on 1 November. Here is why.

The 2019 Budget Review forecasted debt to reach 56% of GDP in 2019/2020, rising to 60% of GDP by 2023/2024 before flattening out and remaining largely unchanged at 60% of GDP 2026/2027. This GDP trajectory assumed a recovery in real economic growth, slightly higher inflation and tax buoyancy, which have all now moderated, such that nominal GDP will be lower than expected, which, in turn will result in lower tax revenue collections.