South Africa differs with Moody’s downgrade

“We disagree with the assessment. They are not giving us enough credit for managing our economy,” Gordhan said on Thursday at the launch of the Black Business Council at Gallagher Estate.

South Africa disagrees with rating agency Moody’s downgrade of South African financial institutions, says Finance Minister Pravin Gordhan.

“We disagree with the assessment. They are not giving us enough credit for managing our economy,” Gordhan said on Thursday at the launch of the Black Business Council at Gallagher Estate.

The minister’s criticism follows Moody’s Investors Service downgrading by one notch the senior debt and deposit ratings of five South African banks namely: Standard Bank of South Africa, Absa Bank Limited, FirstRand Bank Limited, Nedbank Limited, and Investec Bank Ltd. The announcement was made on Wednesday.

Gordhan said rating agencies were shown up for their “inadequacies” during the global economic meltdown of 2008.

“They want to paint us with the same brush,” he said, referring to crisis in the Eurozone. Last month, the credit rating agency cut the long-term credit ratings of six Eurozone countries including Italy and Spain.

“We have an excellent credit record in South Africa, general government debt this year is 39% - well below the median of 44%. We are doing well compared to our peers,” explained Gordhan.

Gordhan said the rating agency had not read government’s national budget, which for the first time reached R1.06 trillion.

The minister said the agency had demanded that countries manage their debt and that when growth did not happen, it then demanded growth. “You can’t have both,” he explained.

According to Moody’s, the downgrades are part of its global assessment of the systemic support levels incorporated in banks' deposit and debt ratings. It said that the rating action was not driven by deterioration in the standalone financial strength or the financial performance of the banks, and that it concluded the rating agency's review for downgrade of the banks initiated on 10 November 2011.

The South African Reserve Bank on Wednesday came out in support of the banks, saying South African banks were sound, well capitalised, profitable and providing investors with acceptable returns.

"The five banks weathered the global financial crisis well, have no exposures to the Sovereign debt crisis of certain troubled European countries and remain largely focused on the Rand-based South African economy," said the central bank