Probability and Potential Impact of an Investment Ratings Downgrade

Earlier this year, ratings agency S&P, warned that if there is no improvement in the economic fundamentals of South Africa that a further downgrade of our investment rating is inevitable. Sighting extremely low economic growth (both Treasury and SA Reserve Bank have forecast growth of less than 1%), the bailout of state-owned enterprises, large budget deficits and policy uncertainty as the issues. These were also raised by Moody’s and Fitch, and Moody’s recent rating, while not a downgrade, has adjusted South Africa’s outlook from stable to negative. Research of countries who have been downgraded to non-investment grade status shows that the policy response by government and policymakers to the downgrade is a particularly important factor with regard to regaining investment status in the shortest possible time.

We host Mike Brown, CEO of Nedbank, who will provide the private sector view regarding the likelihood of a downgrade, the implications for business and consumers if it were to happen, and suggestions as to how the damage could be mitigated. We will also hear from the Deputy Director-General of Treasury, Monale Ratsoma, who will provide government’s perspective on the likelihood of a downgrade, and the most likely Treasury response relating to policy changes and the prioritisation of expenditure to return to investment grade as quickly as possible.

About the Speakers

Mike Brown is CEO of Nedbank Group and Nedbank Limited. Having qualified as a chartered accountant at Deloitte & Touche specialising in financial services, Mike left Deloitte to join NBS Treasury where he led the merger of NBS Corporate and the commercial industrial lending division of BoE Private Bank. He was later appointed as MD of BoE Corporate, as well as a main Board Director of BoE Ltd. Post the merger of BoE and Nedbank, Mike was appointed as MD: Property & Asset Finance and then as CFO of Nedbank Group where he was an integral part of the team responsible for the design and execution of the successful turnaround of Nedbank Group. Nedbank’s strong performance during his tenure as CEO bears testimony to Mike’s leadership qualities.

Monale Ratsoma is currently the Head of Economic Policy at the National Treasury, South Africa. The Economic Policy division plays a central role in formulating and coordinating appropriate growth-enhancing policies that strengthen employment creation. The key responsibility of the Economic Policy division is to provide policy advice on macroeconomic developments, international economic developments and microeconomic issues. Previously he was the Head of Liability Management at the National Treasury of South Africa. Before joining the National Treasury, Monale worked as a Chief Economist for Thebe Investment Corporation, after a long stint as a Senior Macro strategist with Absa Capital, a member of Barclays Capital.