Moody's lowers rating on South Arica to 'negative' from 'stable'

Global rating agency Moody's Investors Services (Moody's) has downgraded rating on South Africa to 'negative' from 'stable.' The lower economic growth and rising risks amid political pressure are major reasons for downgrading the rating.

Moody's has affirmed South Africa's Baa2 government issuer ratings. Africa's most developed nation is suffering from lack of human and physical infrastructure resources.

Despite steep depreciation in the exchange rate, the external position is manageable for the South African economy, forecast Moody's. The global rating agency sees credit metrics as though roughly in line with quantitative and qualitative comparisons.

Similarly, Moody's has also affirmed Baa2 rating of the ZAR Sovereign Capital Fund Property Limited, which is a special purpose vehicle.

According to its global credit research report by Moody's, the increased probability for lower growth for prolonged period, rising risk of fiscal slippages and political pressures are major hurdles for faster growth. The reason for affirming government's Baa2 rating is country's track record of sound macroeconomic policies.

South Africa witnessed three finance ministers changing charge. The sluggish stock market is another challenge for the country. Adding to this, weakening currency is impacting economy following the economy slowdown in China, which is a major trading partner.

International Business Times (IB Times) reports that the second largest economy and most developed nation in Africa continue to face financial crisis. However, South Africa has reputation for its key investment location for the global markets. The reappointment of widely acclaimed and fiscally prudent Pravin Gordhan as finance minister this week brought some confidence among investors.

South Africa is suffering increasing rate of unemployment, which is hovering at 25 percent. The large pool of manpower is untapped by South African industry. The manpower needs skill enhancement to increase employability, suggest industry experts.

According to a story published in IT News Africa, South African industry is facing a lack of relevant skills in the country. Pitso Kekana, Head of Public Affairs and Corporate Citizenship for Samsung Africa RHQ, said: "The key is to find ways of upskilling what is largely the previously disadvantaged portion of the population to empower them to find employment.

The adverse conditions in South Africa are major hurdles for long-term economic growth. Moody's made its conclusion as the country is lagging in both human and physical infrastructure resources as well as political/policy uncertainty. Skills shortages are the result of the inadequacies of the education system.