Moody's pushes South Africa's debt to verge of junk status


Dark Blue Banner


Evaluating the financial materiality of gender diversity factors

Calvert tested the financial materiality of five gender diversity factors: (1) number of female board members, (2) percentage of female board members, (3) number of women in board leadership roles, (4) number of women named executive officers (NEOs) and (5) TruValue’s circumstantial score related to diversity and inclusion news/issues over a three-year period.


Monthly Market Monitor

Monthly Market Monitor

Concise economic and asset class data in clear, impactful charts.


Filter All Insights

Use the form below to filter insights by Topic Category or Content Type.

Topic Category

Content Type


Filter Insights by Date:     or  Show recent results
The article below is presented as a single post. Click here to view all posts.

All Articles ()

There are currently no articles for this filter

By Emerging Markets Debt TeamEaton Vance Management

Boston - Moody's Investors Service downgraded South Africa's credit rating one step closer to "junk" status on Friday, but refrained from pushing it all the way there - for now. Moody's changed the country's rating to negative from stable, and in so doing kept in it in investment-grade territory. Fitch and S&P have rated South Africa's debt as junk since 2017.

Should Moody's cut South Africa's rating to junk, it would result in automatic expulsion from the FTSE World Government Bond Index - that would prompt passive index-based funds to dump billions of dollars of the country's bonds, and likely raise its borrowing costs.

The country is struggling with declining revenues, rising expenditures, higher debt and failing state-owned enterprises (SOEs) - most notably the electric power utility Eskom, which is being bailed out by the government.

The change in outlook from Moody's comes after Finance Minister Tito Mboweni on Wednesday failed to present a clear rescue plan for Eskom. President Cyril Ramaphosa has pledged to restructure the utility but has faced tremendous opposition from unions who see it as a bid to privatize it.

The finance minister also raised projections for this fiscal year's deficit to 5.9% of GDP from 4.5% and warned that debt will likely exceed 70% of GDP by 2022/2023. The Eskom bailout contributes significantly to South Africa's budget deficit.

This year will be the worst economically since the recession following the global financial crisis in 2009 and the sixth-consecutive year in which GDP per capita contracts, while the unemployment rate is currently at 29.1%.

The Moody's downgrade effectively gives South Africa three months to improve on its "continued deterioration of finances."

Moody's said that "South Africa's high unemployment, income inequality, and related social and political challenges have proven to be a greater obstacle to government plans to raise potential growth and contain fiscal deficits than we expected a year ago. We have revised our medium-term GDP growth projections for South Africa to 1%-1.5%, down from earlier expectations of a gradual increase to 2.5%-3%."

Bottom line: The global income team long has been critical of South Africa's policies and fundamentals, as we have consistently witnessed budgets getting revised in a negative direction and growth underperforming. Junk status may be just around the corner.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.