Seldom has the saying “no news is good news” been more true. Moody’s Investor Service on Friday declined to issue a new rating on SA’s debt, meaning the country remains on the cliff edge of junk status, but has not yet been tipped into the crevasse.

Moody’s gave no reason for their decision, but it will provide support for the perennially beleaguered rand, it will help to stabilise inflation, and it will present one less stick for opposition parties to beat the government with during the final stages of a crucial election campaign.

There is no knowing exactly what Moody’s assessors were thinking when they made the decision, but it’s the last point that might have just made the difference: Moody’s would presumably not have wanted to be accused of trying to influence an election outcome whatever the truth about the SA’s economy might be.

According to a Bloomberg poll, half of SA’s economists felt the country would be downgraded, and it’s not hard to see why: Eskom blackouts will probably lead to even poorer growth prospects than were already predicted. In fact, the Reserve Bank itself slightly downgraded SA’s growth for the year as recently as Thursday this week.

The argument for standing pat is also strong, however; SA has a new head of SARS, the various commissions of inquiry are exposing SA appalling corruption to the sunlight’s laudatory sterilisation process, and the governing ANC is at least notionally on a reformist track.

Like the voting record of SA’s economists, the decision hung in the balance, and Moody’s have apparently decided that discretion is the better part of valour. But for that precise reason, it also means SA is not off the hook. SA’s debt markets have in fact got a smidgen weaker, and consequently, the cost of the R500-million a day the SA government borrows has got a little more expensive.

Head of Capital Markets Research for Econometrix Peter Attard Montalto said after no report was issued that “South Africa has been denied its cathartic moment of actually knowing Moody’s opinion and updated views”.

But the dagger still hangs over the economy, he said. Moody’s can change their decision any time, but the new formal calendar date for an assessment will be November 1. However, Montalto says the possibility of a post elections committee and assessment is high.

“After the May election, Moody’s and other credit rating agencies will presumably want more clarity and certainty on key issues such as likely policy changes, a new Cabinet, and SA’s future economic direction. The Moody’s update remains pending the latest economic and political developments,” said NWU Business School economist Prof Raymond Parsons.
.
“The economy is not yet out of the woods and Moody’s decision should be seen as a stay of execution, rather than as a reprieve,” he commented.

Montalto said, “We view this as a further signal of the huge risk aversion within Moody’s at taking any kind of long term, reasoned view of where the economy and credit risk is going… Moody’s instead has relied on, we think excessively, on relative arguments versus its peers for keeping the rating unchanged,” he said.

That may be, but, in the meantime, South Africans can breathe a little easier, economically speaking. BM