Loadshedding could dim the lights on South Africa’s credit rating

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The South African Reserve Bank (SARB) Monetary Policy Committee will meet on Thursday to discuss both the repo rate and the prime lending rate.

The repro rate is expected to remain unchanged at 6.75%, while the prime lending rate is expected to be 10.25%. Although the rates are expected to remain relatively stable, the ongoing electricity problem and fuel prices could put pressure on these rates next month.

12e15782 2019 03 26 the rand report - Loadshedding could dim the lights on South Africa’s credit rating

Moody’s, the only major rating agency that
hasn’t rated South Africa as junk status, will be delivering their review on
Friday after both Fitch and S&P downgraded the country to below “investment
grade” last year. Economists and investors fear the worst as the ongoing
problems surrounding Eskom could be the final nail in the coffin for South
Africa’s credit rating.

Moody’s is expected to change its outlook
on South Africa’s debt from “stable” to “negative”. While this may be better
than being downgraded to junk status, it means that a downgrade would be
imminent sometime this year. A downgrade to junk status would prove crippling
for the Rand and force investors to pull money out of the country.

The Rand felt the weight of last week’s
load-shedding. Eskom has since announced that the power grids are looking
better than they were this time last week and it doesn’t look like load-shedding
will be implemented this week.

event calendar

26 March

  • Smaller US data publishing: Housing
    price index, building permits, consumer confidence and housing start data all
    to be released and cause short-term volatility for the US Dollar.

27 March

  • ECB speeches:
    Draghi, Praet, Lautenschläger,
    De Guidos and Mersch giving speeches regarding the European Central Bank.

28 March

  • US GDP: Measures the market activity and
    is a sign of a country’s economic growth.
  • SA interest rate decision: Interest rate
    expected to remain at 6.75%. Any change will bring volatility to the Rand.

29 March

  • US-China trade talks: The two biggest
    economies in the world will try to settle the current trade war.
  • Moody’s credit rating: At this stage,
    anything but junk status will be a positive for the South African economy and the
    Rand. A change from “stable” to “negative” should see the Rand weaken slightly.

– Dean Reich

The post Loadshedding could dim the lights on South Africa’s credit rating appeared first on The South African.

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