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Moody’s Investors Service has warned that political infighting‚ low growth and unemployment pose the greatest risks to the South African economy in a credit note released just after midnight on Saturday‚ South African time.

Moody’s is the only one of the three main international rating agencies to rate SA two notches above junk‚ and has historically remained optimistic about SA.

 Instead of delivering a sovereign credit rating decision‚ Moody’s instead released research papers on SA‚ in which it highlighted the upsides and risks to the country’s economy.

Fitch on Friday announced kept SA’s rating at BBB-‚ one notch above sub-investment‚ but dropped the outlook from stable to negative. It also said political risks to standards of governance and policy-making had increased‚ and would remain high at least until the electoral conference of the ANC in December 2017‚ negatively affecting macroeconomic performance.

Moody’s has SA on Baa2 with a negative outlook.

Moody’s said in its note the South African political scene continued to be “noisy” as the country’s democracy matured‚ but that key institutions remained resilient.

“For example‚ in late October‚ the national prosecutor dropped its charges against the Finance Minister Pravin Gordhan. Days later‚ the public protector’s office released an investigative report on state capture‚ pointing to the strength of the protector office.”

“The negative outlook on SA’s Baa2 government bond rating reflects risks related to the implementation of structural reforms aimed at restoring confidence and encouraging investment‚ upon which Moody’s bases its expectations for a gradual growth recovery and debt stabilisation in coming years‚” Moody’s.

“The negative outlook also recognises the downside risks associated with political uncertainty and low business confidence as well as the challenging external environment characterised by low growth‚ investment and trade‚” it said.

“SA’s rating would likely be downgraded in the absence of fundamental structural reforms supporting higher and sustainable medium term growth. Continued accumulation of public debt and contingent liabilities in terms of GDP would also put downward pressure on ratings. Finally‚ political infighting impeding the government’s ability to implement key structural reforms and contributing to protracted low business confidence would also be negative.”

Emerging market economist at Nomura Peter Attard Montalto said he think that Moody’s note is a way of negatively doing nothing.

“They did not want to affirm. This‚I think‚ was an active decision to send a signal.”

S& P Global is poised to issue its review on December 2. It ranks SA BBB-with a negative outlook.

Tenterhooks

SA has been on tenterhooks about its ratings for the past year‚ having narrowly escaped downgrades twice‚ about six months ago and a year ago.

Agencies have repeatedly raised their concern about the need for structural reforms to remove impediments to higher growth in SA.

The Reserve Bank’s latest forecasts for growth‚ at its announcement on Thursday that it was leaving interest rates unchanged‚ were unchanged from the September monetary policy committee meeting.

Growth of 0.4% is forecast for 2016‚ picking up to 1.2% in 2017 and 1.6% in 2018.

The rating agencies have cited instability and inflexibility in the labour market‚ policy uncertainty and a toxic political environment as among their concerns.

Finance Minister Pravin Gordhan has been instrumental in the efforts to convince the agencies that SA is doing what needs to be done to put it on a higher growth trajectory‚ and to address concern about corruption at the highest levels of government.

The fraud charges instituted against him‚ and then withdrawn‚ and the allegations contained in former public protector Thuli Madonsela’s State of Capture report‚ have only added to the concern about the direction SA is headed.

President Jacob Zuma this week bemoaned the “politicisation” of the rating agencies’ decision.

However‚ SA’s institutions — especially its courts — and civil society have been lauded as a positive factor.

S& P‚ which said earlier this month that SA needed to make better progress on the areas of concern‚ said it rated SA’s institutions as neutral‚ because checks and balances were enforced by the courts rather than other arms of the state.

Some progress has been made on economic reforms‚ however.

The Treasury‚ in its medium-term budget policy statement‚ announced further belt-tightening and plans to raise taxes to ensure net debt stabilises below 50% of GDP‚ despite slower growth.

In Nedlac‚ broad agreement has been reached on a package of labour stability reforms that organised business is optimistic will reduce violent and protracted strikes and heralds a more constructive era of labour relations.

But many economists doubt this is enough to stave off further downgrades.

This time last year

In December 2015‚ just as rating agencies were preparing their reviews of SA‚ “Nenegate” broke‚ when Zuma fired Nhlanhla Nene as finance minister and replaced him with the little-known Des van Rooyen. That decision was reversed after the outcry that followed it‚ and Gordhan was installed as finance minister.

About a week after that‚ Moody’s issued its rating review‚ maintaining the rating but cutting the outlook to negative from stable.

In June‚ all three agencies affirmed SA’s ratings‚ but Moody’s was the only one to offer an overwhelmingly positive assessment of the economy and the Treasury’s ability to return SA to fiscal stability and reignite growth.