SA’s credit rating – where we stand

·13 Jun 2014

Credit rating agencies Standard & Poor’s (S&P) and Fitch have both issued their latest ratings for South Africa – and the results are not positive.

Fitch on Friday morning (13 June) revised the outlook on South Africa to negative from stable and affirmed its credit rating at ‘BBB’, near the bottom of the investment-grade scale.

The ratings agency said the outlook revision was partly due a strike at platinum mines, the country’s longest-ever mining strike that began in January when workers downed tools demanding higher wages.

Late on Friday evening, S&P revised its rating of SA down to ‘BBB-‘ with a stable outlook – the lowest rating of all agencies, and the lowest level the country’s rating has hit since 2002.

The ratings cut was due to a prolonged strike in the platinum mining sector, as well as weak domestic and external demand, which has led to a contraction in GDP in the first quarter of 2014 and is likely to depress second-quarter and full-year GDP growth rates and reduce South Africa’s fiscal flexibility, S&P said.

“The downgrade reflects our expectation of lackluster GDP growth in South Africa, against a backdrop of relatively high current account deficits, rising general government debt, and the potential volatility and cost of external financing.”

“In addition, current account deficits are relatively high, and their financing relies on potentially volatile capital flows,” the firm noted.

“We are therefore lowering the long-term foreign currency rating on South Africa to ‘BBB-‘ from ‘BBB’ and the long-term local currency rating to ‘BBB+’ from ‘A-‘.”

S&P said the stable outlook reflects its view that current labor tensions will be resolved and that lackluster economic performance will not affect South Africa’s fiscal and external balance beyond our revised expectations.

Moody’s currently holds South Africa’s credit rating highest at Baa1 level – equivalent to BBB+ on the S&P and Fitch scale.