Moody’s Investors Service, (“Moody’s”) has today placed all the global scale ratings assigned to eight South African corporates under review for downgrade. 

Today’s rating actions on the eight South African corporates follow the weakening of the South African government’s credit profile, as captured by Moody’s decision to place the sovereign ratings under review for downgrade on 24 November 2017.

Moody’s placed the global scale ratings under review from negative of:
• Barloworld Limited
• Fortress REIT Limited
• Hyprop Investments Limited
• Imperial Group Ltd
• Redefine Properties Limited
• Telkom SA SOC Limited
• The Bidvest Group Limited
• Transnet SOC Ltd.
Moody’s has taken no action on the following corporate issuers:
• AngloGold Ashanti Limited
• AngloGold Ashanti Holdings plc
• Gold Fields Limited
• Gold Fields Orogen Holding (BVI) Limited
• Naspers Limited
• Myriad International Holdings B.V.
• MTN Group Limited
• MTN (Mauritius) Investments Limited
• Steinhoff International Holdings N.V.
• Steinhoff Investment Holdings Limited
• Steinhoff Europe AG
Ratings at these entities carry some potential exposure to South Africa risk because of their legal domicile. However AngloGold Ashanti Limited, Gold Fields Limited, Naspers Limited and Steinhoff International Holdings N.V. have significant diversification outside South Africa so have the potential to be rated at least one notch above the South African sovereign. We see MTN Group Limited as having less potential to be rated higher than South Africa, but it was downgraded on 13 June 2017 so its rating is currently positioned below South Africa.

The placement of the ratings under review for downgrade reflects the credit linkages of these corporates with the South African economy and their material exposure to the domestic operating environment. 

The rating under review reflects the uncertainty surrounding political developments and the potential weakening of the country’s institutional, economic and fiscal strength that has translated into depressed consumer and business confidence which flows through to lower growth prospects for these corporates. The rating agency expects GDP growth of only 0.5% in 2017 and 1.2% in 2018 from 0.3% in 2016, levels significantly below the government’s target growth.

The review will assess the credit implications and potential vulnerabilities in the context of a currently challenging operating environment on each of the issuer’s ratings. The impact on all the national scale ratings will also be assessed in the event the government of South Africa’s Baa3 local currency bond being downgraded to Ba1.

Moody’s said it had also had today placed the global scale long-term ratings of 12 South African regional and local governments (RLGs) and three government-related entities
(GRIs) under review for downgrade. City of Cape Town’s, City of Ekurhuleni’s and City of Johannesburg’s global scale short-term issuer ratings of Prime-3, were also placed on review for downgrade. The long term and short term national scale ratings are not affected by this action. 

Today’s rating actions follow the potential weakening of the South African government’s credit profile, as captured by Moody’s recent decision to place South Africa’s Baa3 government bond ratings on review for downgrade.