Moody’s, Fitch cautiously upbeat about recent moves in SA


Cape Town – Credit ratings agency Moody’s has said that a resolution of the issues around the Mining Charter would be credit positive for South African mining houses. 

It has also welcomed the South African Reserve Bank’s (SARB’s) announcement that it would establish a new financial technology programme to experiment with digital technologies.

In a research note published on Monday, Moody’s said that solving the impasse around the charter would be positive for mining groups AngloGold Ashanti, Gold Fields and Sibanye Gold.

On Sunday evening President Cyril Ramaphosa and industry body the Chamber of Mines announced that a court application to review and set aside the charter, set to start Monday, had been postponed by mutual agreement. 

“I am certain we will be able to resolve the current impasse and agree on a charter that both accelerates transformation and grows this vital sector of our economy,” Ramaphosa said in a statement.

“In line with the spirit and the tone of the message as stated by the president during SONA (State of the Nation Address) on February 16, the Chamber of Mines is agreeable to the request by the Presidency to give negotiations a chance,” the chamber said at the time.

The chamber, which represents most mining companies operating in the country, has argued the charter would hobble the industry if implemented.  

Moody’s is the only one of three major ratings agencies which has South Africa’s foreign-currency and rand-denominated debt at investment grade.

The research note did not say how the court bid’s postponement would affect its next ratings action for the country, which is set to take place on March 23 but may be announced at any time. 

In late November, during its last ratings action for the country, Moody’s said it would reassess South Africa’s rating – which is on on review for downgrade – after the 2018 Budget. 

The budget will be delivered on Wednesday afternoon. 

Moody’s also praised news of the Reserve Bank’s financial technology programme.

“The adoption of fintech infrastructure and regulation following these assessments, which are scheduled to conclude this year, will improve efficiency, strengthen anti-money laundering practices and increase South African technologies’ competitiveness globally,” it said. 

“These are credit-positive developments for banks that will decrease their transaction costs.”

More policy certainty 

Moody’s rival ratings agency Fitch said in a research note on Monday that the resignation of former president Jacob Zuma and the elevation of Ramaphosa to the Presidency “reduces the risk of policy paralysis”. 

Fitch kept South Africa’s long-term foreign and local currency debt ratings at ‘BB+’ – commonly known as “junk” – with a stable outlook at its latest ratings action in November 2017.

“Ramaphosa’s early succession suggests that support among senior ANC members is coalescing around him,” said Fitch, “But divisions within the party remain, and preparations for next year’s parliamentary elections could also affect policy-making through 2018.” 

The ratings agency said the newly elected president appears committed to addressing shortcomings in governance at state-owned enterprises, noting that he was the driver behind the installation of a new board at power utility Eskom. 

“The market reaction to Ramaphosa’s appointment suggests investors and businesses view his commitment to tackle corruption and revive the economy favourably,” it said. “The political backdrop has depressed confidence and growth in recent years, and the advent of a new president may support the current cyclical recovery.”

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