Younger population counts in Africa’s favour – Moody’s

Younger population counts in Africa’s favour – Moody’s

A sign for Moody's rating agency stands in front of the company headquarters in New York, September 18, 2012.

Moody’s also pointed to a growing gulf in income inequality in the country – a concern that could pose social volatility, compared to other emerging markets.

Moody’s is delving into political stability, good governance, economic and fiscal policy certainty in assessing South Africa’s economic outlook to determine the country’s credit rating, experts told the international ratings agency’s Sub-Saharan Africa investment summit in Johannesburg yesterday.

The gathering found the biggest risks facing SA were due to 74% domestic politics, 16% global economy and 10% governance, with Moody’s pointing to a growing gulf in income inequality in the country – a concern that could pose social volatility, compared to other emerging markets.

A panel discussion focused on the sovereign growth and fiscal outlook, and Moody’s lead sovereign analyst Lucie Villa said the government was “still constrained to implement good policies”.

Having last seen a surplus budget in 2009, with capital spending of 5%, SA spent 16% on transfers and subsidies to the public sector and another 16% on households.

Moody’s associate managing director responsible for emerging market insurance and African banking Antonello Aquino said protectionism posed challenges to an export-driven growth strategy.

“However, we have seen an acceleration in intra-Africa trade, which is positive,” he said.

With a 5% population over the age of 60, Africa had an edge over Europe, which had a 25% population in the same age group, “meaning that the continent has a demographic advantage of a sizable youth population, which could grow the continent’s economy”.

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