Moody's priceless gift to President Ramaphosa

SOUTH AFRICA - In Brief 24 Mar 2018 by Iraj Abedian

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As I speculated in my last Note a week ago, yesterday Moody's kept South Africa's global credit rating at investment grade, and importantly changed its outlook from "negative" to "stable". I beleive , all considered, this is a jusified assessment. More imprtantly, however, this is a priceless gift to President Ramaphosa who would have been thrown into a deep financial and political economy mini-crisis if he had to manage the consequences of a "junk-graded economy" and the large scale outflow of capital so soon after his ascendency to the presidency. With his fragile hold on his own party, ie the ANC, and with a considerable force of his ANC-detractors still fully operative within his Party, Ramaphosa needs every bit of support that he can get from the broader political economy forces; especially from the global capital markets. His government has inherited a wrecked fiscus, vulnerable to a range of institutional and economic infirmities. The last thing he could deal with would be a material rise in the cost of borrowing, for the government and for SA Inc, and having to countenance the political embrassment of presiding over a junk-graded country. Saved by the skin of his teeth, Ramaphosa can now focus on eletioneering, and stay resolute on a systematic clean up of the messy state machinery that x-President Zuma left behind. Between now and next year May, and post 2019 national and provincial elections, Ramaphosa has to consolidate his hold on the ANC, and raise his stature within the broader society to enhance not only his own political status, but more so to solidify the social and investor confidence in his ability to navigate some hard political economy complexities...