South Africa: Rating review remains Damocles sword – Commerzbank


Elisabeth Andreae, analyst at Commerzbank, suggests that the decisive factor for the South African economy is whether the rating agency Moody’s maintains its assessment for the sovereign rating.

Key Quotes

“It is the only one of the three major agencies to still award investment grade. The result of the review will be announced on 29 March. In our view, the lack of success in consolidating public finances and reviving the economy has increased the risk of a rating downgrade. We therefore expect at least a deterioration in the rating outlook to negative, which will be followed by a renewed rating review after a few months.”

“We expect the rating decision scheduled for 29 March to weigh more heavily on the rand in the coming weeks. In addition, in the course of the forthcoming elections, we expect to see sharper campaign rhetoric, which could fuel uncertainty about the political course. And last but not least, it should be remembered that the rand remains at the mercy of global risk sentiment.”

“Recently, the rand has benefitted from a brightening risk mood due to positive news on trade negotiations between the USA and China. However, the mood can change quickly in view of the global risks. We therefore advise ZAR investors to exercise caution.”

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