South Africa’s ability to implement policy reforms, especially those aimed at the ailing infrastructure, will be key to bolstering economic growth and creditworthiness for one of Africa’s top economies, Moody’s said today.
Logistics constraints such as rail and port bottlenecks as well as high costs of electricity and water supply challenges are hobbling South Africa’s industry, mining and manufacturing sectors among others.
Companies such as ArcelorMittal South Africa (Amsa) have had to close steel manufacturing plants as a result of the logistical bottlenecks, among other reasons.
Moody’s analysts expect the logistics challenges faced by the SA economic to persist for longer. However, South Africa has now exited electricity load-shedding that cut productivity in the past few years.
“For South Africa, structural bottlenecks – particularly in logistics – will take time to ease. Improvements in economic growth will be gradual and difficult, notwithstanding a significant decrease in energy outages and load shedding,” said Mickaël Gondrand, AVP-analyst at Moody’s.
In its Sub-Saharan Africa Sovereign Outlook for 2025 released today, Moody’s also said Nigeria, the continent’s largest economy, “will continue to pursue efforts to establish a better-functioning foreign-exchange” market.
“The capacity of the region’s two largest economies to implement structural reforms will be key to bolstering their economic growth and creditworthiness,” it said.
In December, analysts from Moody’s Investors Services projected stability for South Africa’s budget retailers.
Budget retailers such as Boxer, which recently completed a separate listing on the JSE, are expected to be stable in the coming year as consumers seek value propositions.
“In South Africa, the operating environment is set to improve; we expect retailers focused on budget-conscious consumers to stabilise and grow above the inflation rate,” said Moody’s analysts.
Moody’s also said SA gold miners such as Pan African Resources, Harmony Gold, and others would continue benefiting from elevated bullion prices next year.
“Gold miners will benefit from high gold prices, and the platinum group metals segment may see a gradual improvement in pricing as miners close unprofitable operations and postpone investments, and metal stocks deplete.”
Moody’s analysts noted that receding inflation and lower policy rates across the major global central banks will support a general trend of monetary policy easing across Sub Saharan Africa. This would allow for a gradual reduction in financing costs.
However, these costs are expected to remain higher than in the pre pandemic period, putting continued strain on debt affordability. Thus, constraints on financing availability will persist for a number of sovereigns, while high external debt servicing needs compared with usable foreign exchange reserves will be another source of credit risk.
Moody’s expected improved growth prospects for Namibia driven by investments in hydrocarbon, renewable energy and traditional mining industries, which could have a potentially transformative effect and support our positive rating outlook.
“For mature oil producers Angola and the Republic of the Congo, economic growth will strengthen in 2025 as an influx of new projects and pickup in gas production from a low base offset the declining yield of ageing oil fields,” it said.
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