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Moody's negative outlook

As we all know, there was some celebration that South Africa dodged a downgrade to junk status by Moody’s.  That is a little bit of a surprise and the Rand actually rallied a little bit on Monday, 4 November, after that news, because Moody’s did exactly what had been expected. 

Consensus has been clear that Moody’s would not downgrade South Africa at that point, but would, as they normally do, change their long-term outlook. That change means that a downgrade is likely to come somewhere between the budget at the end of February 2020 and June 2021.  It may come sooner than people think but the belief of most of the media in South Africa seems to be that it is about 12 to 18 months away.

The real question is, are there steps we can take to avoid that downgrade and will the government take those steps?  Tito Mboweni said, “It is now or never – government, labour, business and civil society – we need each other more than ever before.”  The problems lie all over, but have obviously been exaggerated by Eskom and its massive debt and the fact that so many people do not even pay for their electricity in South Africa. It is important to understand that if Moody’s does cut our rating, it will fall somewhere between $10 billion to $15 billion of bond funds to automatically be sold, which would in turn increase borrowing costs for the government and put the government in a worse position than they are now.  We now need to hope that we can keep that Moody’s rating and not be downgraded. 

Posted by Michael de Broglio on Friday 08-Nov-19 Share on Facebook   Tweet It

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Comments

Dasanya  said:
on Friday 13-Dec-19 10:30 AM
I am anticipating a downgrade because honestly we have had quite some time to avoid these downgrades and yes, Rome was not built in a day so South Africa cannot be expected to sort out all of its problems in such a short time but some progress should be made. It just seems as if our country's issues are getting progressively worse without any noticeable action being taken.

Prishani  said:
on Monday 02-Dec-19 03:11 PM
I honestly don't know how many more warning signs our country needs before our government deals with this matter with a sense of urgency! I also wonder what goes on behind the scenes at the various responsible departments and if there is any sense of panic!

Tamaryn  said:
on Thursday 28-Nov-19 05:02 PM
I hear that the likely downgrade with happen either in February 2020 or November 2020. I am hoping we can push past the February 2020 mark just to allow some more time to get SA stronger and avoid the November 2020 downgrade. But if SAA, Eskom, and unaccounted for government expenditure continue in the fashion they have been we're in trouble.

Jolene   said:
on Thursday 28-Nov-19 04:50 PM
It is a relief that we were not downgraded this time around but I think it is coming sooner than later. I don’t want to be negative about South Africa but we are going downhill at an alarming rate.

Thabitha  said:
on Thursday 28-Nov-19 08:01 AM
I agree with Mr Mboweni he is correct South Africans wants a way out while everyone is taking step back watching government alone wont fix the country, we believed that when Ramaposa takes over things will be better but till today nothing has changed.

Natasha Gouws  said:
on Wednesday 27-Nov-19 10:20 AM
All we can do is hope and pray the government does something regarding this.

Helen  said:
on Tuesday 26-Nov-19 07:42 AM
"Fellow South Africans, now is the time to roll up our sleeves and do what we have to do. It’s now or never. We need all hands on deck. The country is ours and it is only us who can turn it around.” - minister Mboweni said.
To say something it is not the same as immediate action!
It is very sad that our government only talking at this moment, while South Africa’s economic growth is deteriorating and does not show any signs of improvement.

patrick  said:
on Monday 25-Nov-19 05:21 PM
Petrol is reaching the end of its usage. Electricity is taking over the world at an alarming speed.

Shristi  said:
on Monday 25-Nov-19 08:07 AM
South African government have to do something drastic if they want to save South Africa from being downgraded.

Fikile  said:
on Friday 22-Nov-19 11:40 AM
It's time we as people start asking our selves if we are happy with other people representing us to the world. The hard part is we are not letting outsides kill us but we are killing ourselves, we are being killed by our own people, the same people that are suppose to be taking our country to better heights they are slowly putting us down and the part that breaks my heart is that we let them.

Melissa  said:
on Friday 22-Nov-19 11:03 AM
Lets hope and pray that the government will start doing what is best for this country.

Mathilda Du Preez  said:
on Thursday 21-Nov-19 07:32 AM
Countries like Rwanda and Ethiopia are growing their economies and eliminating poverty, but we are stagnating. The people of South Africa are poor because African Leaders chose to put their ideas and their ideas only, instead of listening to the individual.
The rich will get richer and the poor will keep on struggling, our government is only here to enrich themselves.
Corruption in South Africa is out of control look as ESKOM and SAA.
It was announced that ESKOM appointed a new CEO Andre de Ruyter,let’s hope he is the right person to lead.
Because if ESKOM collapses, it collapses the entire economy.

Kayla  said:
on Tuesday 19-Nov-19 08:40 AM
I hope that it will fall into place and turn out the best for our country, we need something positive to happen.

Brumilde Cronje  said:
on Monday 18-Nov-19 10:27 AM
I think at this stage the people who run this country are running around trying to put out the small fires instead of looking for the ones that are causing more damage. We need educated people with smart plans to help us

Tersia  said:
on Friday 15-Nov-19 04:36 PM
I have heard of this and what I also heard was that this is because the Springboks have won the World Cup, not sure if that is the true story. I am not sure how long we can delay that the downgrading and even what would need to change. I feel we are so far down a road that we cannot come back from in South Africa - there are just too many things that will have to change and drastically as well.

Ashleigh  said:
on Thursday 14-Nov-19 09:19 AM
Thank goodness its held the rating, I'm surprised that it has because of all the problems but let's hope and pray that some changes are going to start happening in this country.

Roxanne  said:
on Thursday 14-Nov-19 09:07 AM
We must just hope that South Africa will wake up and do what's good for the future, OUR CHILDREN, and stop thinking of themselves

clare  said:
on Thursday 14-Nov-19 09:06 AM
I hope that we can keep that Moody’s rating and not be downgraded, I hope that the government can now step in and start making better choices and change the effects of this. We need our Water issures sorted build more the right structure to better our lives, and also our Electricity this should of been fixed long ago. People need to stop worrying about the past and worry about the Future of our Country..

Sarah  said:
on Thursday 14-Nov-19 09:02 AM
With the downgrade, the government has to pay more in debt servicing costs, meaning that it will have less to spend on social initiatives and infrastructure. In order to plug the funding gap, government will have to increase revenue through higher taxes. But the effects of junk status don't end at borrowing.

So for the consumer normal day to day living will increase more and more.

Thembi  said:
on Wednesday 13-Nov-19 04:04 PM
Let’s hope government will take right direction and save South Africa from being down graded

Megan  said:
on Wednesday 13-Nov-19 08:22 AM
I think the government is too all over the place and not focusing on Eskom who is aiding in downgrading our economy. Some drastic action needs to be taken.

Claudia B  said:
on Tuesday 12-Nov-19 08:14 AM
I hope we don't get downgraded, this will be a make or break and we hope that the government will take the right steps.

Michelle D  said:
on Monday 11-Nov-19 03:28 PM
South Africa is indeed dwindling somewhere down by rock bottom in terms of our economy. In saying this, the recent transparency and accountability has given me hope in our future. Tito Mboweni in his budget speech afforded significant emphasis on the fact that Eskom is the pinnacle of the economic turmoil of South Africa. I for one think that the unbundling of Eskom is a fantastic move, Eskom is far too big to be managed which has lead us into the situation we have now. The unbundling will allow for easier transparency and more effective leadership. All we need now is some good leadership which is undoubtedly lurking somewhere.

Victoria  said:
on Monday 11-Nov-19 08:50 AM
I hope our Government can do something drastic to make sure we won't be downgraded. Eskom is a big problem with regards to our economy.

Henrietta  said:
on Monday 11-Nov-19 08:26 AM
This is depressing news. The amount of debt Eskom alone has is astounding. I also agree with some comments below, putting the right people in the right places might be useful. I can't see how our own government cant pull their fingers and do something about it. I was stunned when I heard of a city in JHB that does not pay electricity at all and then a news article that they are prepared to pay a R100. I mean really what about the rest of us who has to pay for what we use or get cut.

Joyce  said:
on Friday 08-Nov-19 04:50 PM
Let’s hope government will take right direction and save South Africa from being downgraded.

Alexis  said:
on Friday 08-Nov-19 04:33 PM
Let us hope that we do not get downgraded and the Government pulls their weight to ensire that that doe snot occur.

sandra  said:
on Friday 08-Nov-19 03:58 PM
Unless the government implements growth-oriented policies, the next few months will be likely that there will be a full downgrade in order to bring the debt-to-GDP ratio.

Michelle Smillie  said:
on Friday 08-Nov-19 03:01 PM
Now is the time for President Ramaposa to prove why everyone put their trust in him. This is a make-or-break situation for a country and it is up to the government to make it.

Fikile  said:
on Friday 08-Nov-19 01:56 PM
The more we keep putting the same people in Parliament we are still killing our selves and still putting our country in more debts. Eskom will keep pulling us down because of the same people that work the but teach people how to bridge electricity so that they don't pay for it, how about the people that buy electricity, do they ever think about them, funny the same people that don't buy electricity are the one's that strike first we the power is off and don't want to know how they will get the power as long as they have it they don't care how they get it.

Lucretia  said:
on Friday 08-Nov-19 12:04 PM
The only way we will prevent a downgrade is if we start putting the right people in the right places to turn our economy around as well as getting rid of SOE's that just keep requesting more and more bailouts. There is an over abundance of MP's that also need to go and then maybe just maybe we can start making more money than we are spending as a country.

Ziyanda  said:
on Friday 08-Nov-19 08:11 AM
Eskom is a liability to our economy, it should just be privatized.

Jadine Richards  said:
on Friday 08-Nov-19 07:28 AM
Eskom really needs to be privatized. I don't know how feesable it is between the bail outs and the debt but the entity is really the problem child of our economy. How long do we continue on with this situation expecting a different outcome?

david  said:
on Friday 08-Nov-19 07:16 AM
the good news is that you can now buy cars, bikes, boats, jetskis and houses for rock bottom prices.

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Johannesburg based attorney specializing in personal injury matters including Road Accident Fund claims and medical negligence matters. My interests include golf, reading and the internet and the way it is constantly developing. I have a passion for life and a desire for less stress!
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