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Gold Fields' debt rating lifted to investment grade

Tuesday, 26 June 2018

JOHANNESBURG - Ratings agency Moody's has upgraded Gold Fields to investment grade.

It’s a boost for the mining industry, which has been hit by a weakening gold price.

Earlier on Tuesday Moody's warned that economic growth prospects would be limited by weak business confidence - with mining reform remaining a concern for investors.

Negotiations continue over the mining charter, with companies and government still at odds on some key issues.

SA ECONOMIC GROWTH

South Africa’s economic growth prospects will be limited by weak business confidence while uncertainty around land and mining reforms remain a concern for investors, ratings agency Moody’s said earlier on Tuesday.

President Cyril Ramaphosa has outlined plans to redistribute land without compensation to address racial inequalities that persist more than two decades after the end of apartheid. Government critics have expressed concern that those plans could infringe on property rights.

The government also plans to increase the ownership stake for black people at mining companies to 30% from 26% within five years as well as other requirements aimed at benefiting communities - moves that have been contested by mining firms.

“Uncertainty over how this (land reform) will be achieved continues to limit near-term investment,” Moody’s analyst and senior credit officer Lucie Villa said in a report.

“(It) could ultimately lead to a more pronounced fall in investment should the final terms of land reform be particularly onerous to businesses.”

Moody’s is the last of the top three major rating agencies to rate the country’s debt in investment grade. It affirmed that rating in March and revised its outlook to stable from negative citing an improving policy framework.

Moody’s said in the report it projects gross domestic product at 1.6% in 2018 and 2.1% in 2019.

The Treasury’s forecasts growth at 1.5% and 1.8% respectively for the same period, although Finance Minister Nhlanhla Nene has said these could revised upwards.

Nene is one of many new ministers appointed by Ramaphosa who has promised to turn around the ailing economy after taking over in February from Jacob Zuma. The former president has been blamed for the country’s many fiscal and policy missteps over the past decade. Zuma denies any wrongdoing.


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