Investments

Safe for now, but ratings risk remains

After a round of credit ratings reviews by the three major ratings agencies, South African government bonds will remain part of the Citigroup World Government Bond Index (WGBI), but only just. The immediate risk of forced selling as a result of being excluded from this index has therefore abated for the time being. While each of the agencies has its own specific methodology for assessing creditworthiness, the common thread through all three reviews is that economic growth is too low, leading to pressure on Government’s finances, worsened by underperforming State Owned Enterprises (SOEs).

Another credit downgrade: buying opportunity or cause for concern?

As an emerging economy, South Africa is heavily dependent on funding from foreigners and local institutions to invest in the infrastructure of the country and fund the nation’s budget shortfall. As a country we only received investment grade status in the year 2000, giving us access to much needed affordable loans from global investors. It’s important that we keep this credit rating healthy. But our country is facing challenges and investors and credit rating agencies are increasingly concerned about our ability to bring our debt under control.

STANLIB: Ratings downgrade - Implication for investors

Facing SA’s fiscal failure

Attention is firmly fixed on the coming round of sovereign debt rating decisions. Whatever the outcome of these reviews, it is clear that in the absence of reform, government’s fiscal position is unsustainable. Its revenue collection track record has been eroded and additional spending priorities and liquidity problems at state-owned companies threaten its expenditure ceiling.