The government did itself no favours last week by bungling things on various energy-related fronts during one of South Africa’s most internationally visible weeks. President Cyril Ramaphosa had an invaluable opportunity to convince international investors – and, more important, Moody’s rating agency – that the government was addressing South Africa’s biggest structural challenges.
Instead, unfolding events suggest the government may have a sorry story to tell, setting the stage for a rating downgrade and dashing business confidence that is just short of a 34-year low. The consensus is that Moody’s will lower South Africa’s sovereign rating outlook but not the rating itself. After last week’s shenanigans, this confidence may prove misplaced.
While South Africa has a much higher GDP per capita than Egypt, says the report, its position in the index has been undermined by the sluggish growth that has continued in 2019, “worsened by power outages caused by problems plaguing its state-run electric utility”. Other worrying developments in the Absa Africa Financial Market Index is that although South Africa still has a sizeable lead in Pillar 1, which measures Market Depth, “the creation of new bourses and key mergers between existing ones will improve the standing of other countries in coming years.”
Pillar 4’s Capacity of Local Investors captures the state of the financial markets. South Africa remains top of the Pillar because of the depth and liquidity of its capital markets. However, again, Mauritius is closing in after taking the second position after the inclusion of its National Pension Fund in the Index.
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