All three major sovereign credit rating agencies had given SA’s February budget a positive reception, while also welcoming the recent political changes, Finance Minister Nhlanhla Nene told a source from London on Tuesday.
Nene, a team from the Treasury and the Reserve Bank, and business representatives have met Fitch Ratings, S&P Global Ratings and Moody’s Investors Service, as well as bond investors, in the British capital this week.
Nene said he believed SA was telling a “credible” economic story. But he acknowledged it was unclear if Moody’s would cut their rating to “junk”.
He said the rating agency and private investors were asking about a government plan to transfer land from white to black owners.
“Our budget was well-received and they seem confident about the political developments in the recent weeks. It is very difficult to read the body language of rating agencies, but I think it is a credible story we are telling,” Nene said.
He said that SA would raise $3bn from the capital markets, which had also responded positively to recent developments in the country.
Tshepiso Moahloli, chief director of liability management at the Treasury, said it could potentially issue in currencies other than dollars and in segments rather than $3bn at once.
“It is all dependent on whether markets are favourable on the road shows, but right now the market is conducive,” Nene said. “We are looking at what needs to be done to stimulate growth, among other things building confidence … credibility.”
Moody’s is the only one of the three major rating agencies that have SA’s foreign-currency and rand-denominated debt at investment grade.
The rating agency is expected to make an announcement next week on Friday. A downgrade would see SA’s expulsion from the Citi World Government Bond Index.
Business Unity SA (Busa) said business was optimistic about SA’s economic prospects after the meetings.
Busa president Jabu Mabuza, who is also the chairman of the Eskom board, said the South African delegation was greatly praised for the progress made in stabilising the country’s fiscal position.
Commitment to greater policy certainty and fiscal consolidation was regarded as vital for attracting investment, as investors reinforced the importance of continued efforts to tackle corruption and inefficiencies within particularly state-owned enterprises, said Busa CEO, Tanya Cohen.
The delegation will also talk to investment firms in Boston and New York later this week.