CAPE TOWN– South African Deputy President David Mabuza has told Parliament that the recent decision by international rating agency Moody’s to maintain South Africa’s investment grade rating, as well as changing the country’s outlook from negative to stable, will go a long way towards restoring investor confidence.
Moody’s announced last month that it had maintained South Africa’s investment grade rating after expressing a view that the previous weakening of South Africa’s institutions would gradually reverse under a more transparent and predictable policy framework.
Responding to oral questions in the National Assembly here Wednesday, the Deputy President said: We view this as a significant shift in the current sentiments of international investors towards us and a vote of investor confidence in the South African economy.
The positive investor sentiment reflected a recognition of the hard work which had been begun by government to move the country’s economy and institutions in the right direction, Mabuza said, adding that Moody’s was clear in acknowledging the gains which South Africa had made under the new leadership of the African National Congress (ANC), now led by President Cyril Ramaphosa.
It is clear we have not just halted economic decline, but we have also embarked on a path of economic recovery and a restoration of the investor confidence in our economy as a country. It must be noted that this is a third consecutive time the South African economy has escaped a downgrade. With a stable outlook, Moody’s has affirmed that we are on the right path, Mabuza said.
The Deputy President said the change in outlook from negative to stable was very important for international investors, who would require that their investments go to countries which have good investment grading.
He also cited the Rand Merchant Bank’s bureau of economic research business confidence index which rose 11 points during the first three months of 2018, showing a significant increase in confidence in six years. Mabuza said this meant that the confidence and optimism of South Africa’s manufacturers, building contractors, retailers, wholesalers and new vehicle dealers had grown.
We are now working to ensure that this renewed optimism leads to real and inclusive economic growth and job creation for the country, he said.
The Deputy President said since the announcement by Moody’s, South Africa has also seen an increase in the demand for SA government bonds, reflecting greater confidence from international and local investors in the country’s economy. Increased demand for South African government bonds is good news, as it translates to lower interest rates for South Africa, both in the public and private sector,” he added.
In the end, consumers ultimately benefit. This means less money is needed to service debt and more money is available for investments and consumption of goods and services, which can drive our economy.
Mabuza said while economic growth exceeded the government’s forecast last year, the government can and should do even more through the restored investor confidence in the economy. As Africa’s most industrialised economy, there is a huge potential to stimulate economic growth by more direct foreign investment in South Africa. The positive change in investor sentiments and the stable economic outlook will support and underpin the President’s call for 100 billion US dollars in investment over the next five years.
Source: NAM NEWS NETWORK