SA’s credit rating is not that bad

Financial journals reported gloomy forecasts for the South African economy when ratings giant Standard & Poor downgraded our country’s credit rating to BBB-.

Credit ratings help determine a country’s cost of borrowing and influence investor appetite for its debt and equities, so they’re very important to the economy. These ratings affect capital flow into the country and the value of the rand.

“The forecast is not that gloomy,” Christo Botes, executive director of Business Partners assured local investors, when he took the floor at the 6th Northcliff Investor’s Club conference. The breakfast conference, which aims to enlighten investors with market knowledge, was held at Benvenuto conference centre in Kelland on 22 July.

Botes addressed investors on the current state of the economy in South Africa.

“South Africa’s foreign currency rating is BBB+, as is Brazil’s. This is a positive. Plus a third of South African debt is held by foreigners, so the ratings look worse than they really are,” Botes said.

He advised investors not let the current credit rating rule their decision making when investing. “We need to build confidence in the market.”

Botes briefly discussed the economic trends in leading market countries. The United States, he said, seemed to be on an upward curve. “House prices there are rising, unemployment numbers are down. There is uncertainty about the fiscal and monetary policy, but conditions may be ready for recovery and sustainable economic development.”

The economical future of the USA is looking bright – South African energy giant SASOL are investing in the country. Botes said that this meant the United States was capable of producing its own energy, which could prove incredibly beneficial for their economy in the long run.

In Europe, lowered interest rates and negative interest rates are not, he said, working. “It’s too early to tell if Europe is ready for recovery,” Botes said.