Moody's changes outlook on South Africa to stable, halts further downgrade

Cyril RamaphosaMoody's on Friday maintained South Africa's sovereign rating and changed its outlook to "stable" on the expectation that transparency in government functioning would improve under the new President Cyril Ramaphosa

Ramaphosa succeeded Jacob Zuma last month, who stepped down in the face of allegations of corruption and favouring the Gupta family in awarding state contracts.

"The recent change in political leadership appears to have halted the gradual erosion of the strength of South Africa's institutions. With changes in governance, a number of key institutions, including the Treasury, the South African Revenue Service (SARS) and key State-Owned Enterprises (SOEs) have embarked on the recovery of their earlier strength," Moody's said in a statement Friday.

The rating agency, which placed South Africa on a review for downgrade last year, maintained its rating at Baa3, stopping short of cutting South Africa's rating further into junk bond territory.

South Africa was hit by a string of downgrades from all three major rating agencies last year, after Zuma fired then Finance Minister Pravin Gordhan in a cabinet reshuffle, triggering a fall in the Rand.

Moody's changed its outlook on South Africa to "stable" from "negative" and expects the government's debt to stabilise at around 55 per cent of GDP over the next two years.

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