This illustrated photo shows stock market information from Moody's Investors Service displayed on a smartphone with the Moody's logo in the background. (Igor Golovniov/SOPA Images/LightRocket, Getty Images)
Moody's Investors Service has warned that South Africa could struggle to make further progress in resolving long-standing issues if a coalition government is formed after this month's elections.
“This includes stimulating years of weak economic growth, curbing chronic power shortages, and reducing sky-high unemployment rates,” said Aurélien Mari, Moody's vice president and senior credit officer. “It will be done,” he said. “The current government is making incremental progress on these issues.”
According to opinion polls, the ruling African National Congress could lose its national majority in the May 29 general election for the first time since seizing power in 1994. The party is expected to remain the largest party, but will be forced to form a new party if it receives less than 50% of the vote. coalition government.
already complicated
“Depending on the strength of the new government's mandate and the concessions it must make to smaller parties to secure support, managing already complex fiscal, economic and social policy objectives could become even more difficult,” Mali said. Stated.
South Africa's gross domestic product (GDP) growth has averaged 0.8% over the past decade, an insufficient rate to address widespread unemployment and poverty. Growth is hampered by frayed port and rail networks, crime and the inability of state-run electricity company Eskom to meet electricity demand due to lack of maintenance and aging power plants.
“This election has increased the likelihood of relatively radical party policies, including policies that are not investor-friendly,” Mali said. “However, we believe that the ANC will remain South Africa's dominant political force even within the ruling political coalition, which limits the risk of a sudden shift from the current economic and monetary policy mix. .”
According to an Ipsos poll released on April 26, the ANC's approval rating was 40.2%, compared with the 57.5% it received in the 2019 election.
It also suggested that the newly formed Umkhonto Wisizwe party, backed by former president Jacob Zuma, was siphoning voters from the left-wing Economic Freedom Fighters. The EFF's approval rating is around 11.5%, down from 19.6% in the February survey, while the MKP has the support of 8.4% of voters.
Moody's South African sovereign rating is stable at Ba2.