SA's Moody rating remains bleak amidst ongoing strikes

Labour unrest has been cited as one of the reasons for the downgrades. (Madelene Cronje, MG)

Labour unrest has been cited as one of the reasons for the downgrades. (Madelene Cronje, MG)

"The fiscal space is eroding," Moody's sovereign analyst Kristin Lindow told a conference in Johannesburg on Wednesday. "A key credit challenge will be reining in government spending."

Moody's, Standard & Poor's and Fitch lowered their rating on South African debt by one level since last year. Moody's has a negative outlook on South Africa's Baa1 rating, the third-lowest investment-grade level.

The rating companies cited deteriorating economic growth, weakening public finances, political uncertainty and labour unrest for the downgrades.

A series of strikes that shut mines last year have continued this year, curbing output and exports in Africa's largest economy.

"There is a mismatch between the expectations of labour and the expectations of mining companies," Lindow said. "Both sides are talking past each other, not to each other. This year's wage round is a matter of considerable debate."

The decision by regulators to grant power utility Eskom smaller tariffs increases than it requested was positive for the economy, as were the government's coherent fiscal, monetary and exchange rate policies, she said.

 

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