Ratings agency Moody's may not have done South Africa any favours by delaying its rating decision, as it has merely postponed the inevitable fallout that the economy will suffer and has lulled the government into a false sense of security. Saveshen Pillay, a financial adviser at RMB Private Bank who has done extensive research on the accuracy of rating actions, said this week that by not downgrading South Africa in tandem with the two other agencies last month, Moody's had made markets "less efficient". The rand weakened close to R14/$ in the days following the downgrades, but it did not plunge as significantly as expected. It has since strengthened, partly due to global factors that favour emerging markets. The delay by Moody's has allowed the government to relax and not immediately make the necessary drastic reforms to return South Africa to investment grade because the local currency rating is not yet fully in junk status. "Had Moody's followed, there would have been more changes...
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