Sound money, sound government, sound policy are the ingredients of economic stability – IRR

2 June 2020 - In a recent out-of-calendar review, credit ratings agency Moody’s affirmed Botswana’s “A2” rating for long-term bonds. The agency changed Botswana’s outlook from stable to negative, likely as a result of the economic turmoil arising from the Covid-19 pandemic.

Press Release

In a recent out-of-calendar review, credit ratings agency Moody’s affirmed Botswana’s “A2” rating for long-term bonds. The agency changed Botswana’s outlook from stable to negative, likely as a result of the economic turmoil arising from the Covid-19 pandemic.

South Africa – a much larger country with a much larger economy – remains on a Ba1 credit rating. Often referred to as “junk status”, such a rating is considered to be a sub-investment grade as it has a significant credit risk.

Botswana’s maintaining an investment-grade rating can be attributed to Gaborone’s sound fiscal management of the economy. The country has a creditable track record of fiscal responsibility as well as good policy-making and a strong adherence to the rule of law. Botswana is also consistently rated as the least-corrupt country in Africa on the Corruption Perceptions Index.

By contrast, the South African government has continued to spend beyond its means, wasted billions of rands on failing state-owned enterprises, and fostered an environment in which corruption thrives. In addition, the South African government’s continued assault on property rights leaves little certainty for investors and stunts the outlook for growth and jobs. South Africa’s debt-to-GDP ratio has been consistently increasing since 2009, while economic growth rates have continued to decline over this period.

Says IRR Deputy Head of Policy Research Hermann Pretorius: “Botswana demonstrates that with sound government institutions, intolerance of corruption and mismanagement, and modest government spending, South Africa can create a good environment for investors. However, if South Africa continues down the road of more state control and continued weakening of property rights and the rule of law, it will continue failing to attract the investment it so desperately needs.”

Media contact: Hermann Pretorius, IRR Deputy Head of Policy Research – 079 875 4290; hermann@irr.org.za
Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za
Kelebogile Leepile Tel: 079 051 0073 Email: kelebogile@irr.org.za

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