Peter Worthington on what SA should do to improve its credit rating

After the much-anticipated Moody's credit rating on South Africa was reprieved late last Friday, Moody's released a credit opinion on the country yesterday. Moody's has decided to leave the country's credit rating at BAA3 with a stable outlook. While this credit opinion does not constitute a rating action, it has provided a positive boost to the rand and various South African sectors. ABSA Senior Economist Peter Worthington sat down for a Skype interview with CNBC Africa to discuss the implications of this decision. Worthington noted the importance of the reprieve, as many economists were anticipating a negative outlook from Moody's, which could have resulted in a downgrade in the future. He highlighted that South Africa still faces significant challenges related to weak economic growth, fiscal imbalances, and issues with state-owned utility provider Eskom. Looking ahead, Worthington pointed out that the next potential review by Moody's is scheduled for November 1st. While an upgrade seems unlikely at this stage, another reprieve maintaining the current rating may be possible. However, Worthington emphasized that Moody's would be closely monitoring the outcomes of the upcoming elections on May 8th to assess the country's ability to implement necessary structural reforms. These reforms are crucial for addressing the country's subdued growth and restoring investor confidence. Worthington also discussed the complexities within the ruling African National Congress (ANC) party when it comes to economic policy. He noted that the party's diverse ideological spectrum makes it challenging to reach a consensus on critical economic reforms. Worthington cited instances where internal party disagreements had hindered the adoption of essential policy measures. While acknowledging some progress in containing the public sector wage bill through attrition, Worthington highlighted the need for more decisive actions to streamline the civil service and public sector enterprises. Despite the budget review's indication of initial success in curbing the public sector compensation bill, he expressed skepticism about the likelihood of significant austerity measures post-election, given the country's high unemployment rate. Ultimately, Worthington emphasized the importance of addressing structural challenges and demonstrating a commitment to sound economic policies to secure South Africa's credit rating and foster sustainable growth in the long term.