INVESTMENT GRADE
GAVIN KEETON: Foreigners still keen to buy bonds but not to build SA’s future
Friday’s decision by Moody’s to retain SA’s investment grade rating comes as a great relief. Moody’s also announced that its outlook for us is now stable. This means we do not have to worry about a downgrade to junk for the immediate future. The decision enables foreign pension funds to continue owning South African government bonds and improves our ability to attract inflows of foreign capital in future. This is important because even with our feeble pace of economic growth, SA still requires foreign funding. We ran a deficit on the current account of our balance of payments with the rest of the world for the 15th consecutive year in 2017. Over this period the value of SA’s imports and what we paid in dividends and interest to foreign investors consistently exceeded our exports and foreign receipts. The gap must be funded by foreign capital inflows. In 2017 the amount required was R114bn. A deficit on the current account of the balance of payments is not necessarily a bad thing. No...
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