Fitch keeps South Africa’s credit rating at junk

Ratings agency Fitch Ratings has kept South Africa’s long-term foreign and local currency debt ratings at ‘BB+’ – commonly known as “junk” – with a stable outlook.

Fitch, which downgraded SA to junk status in April, was the first of the three major ratings agencies to announce its November review of SA’s credit rating.

Standard & Poor’s and Moody’s are set to make their announcements on Friday.

National Treasury said in a statement on Thursday that it had “noted Fitch’s decision not to further downgrade South Africa deeper into ‘junk status'”.

“By not downgrading the country further, Fitch is providing South Africa with an opportunity to address issues that can lead to an upward revision to the ratings,” Treasury said.

“While Fitch’s ratings imply that South Africa is still in line with other emerging markets in the same ratings category, the implications are huge for the country.

“A ‘junk status’ ratings has implications for the economy, state debt costs, state owned companies and the ordinary man on the street,” it said.

Since April 2017, when Fitch downgraded the country to “junk status”, SA has seen a recession, borrowing costs have increased, and revenue has underperformed, Treasury said.

“Therefore, government and the country collectively cannot afford to become complacent about these rising risk exposures,” it said.

ANC conference 

In its review announcement, Fitch said that South Africa’s ratings were “weighed down by low trend growth, sizeable government debt, contingent liabilities and deteriorating governance standards”.

However, it also noted that these weaknesses were “balanced by a favourable government debt structure, deep local capital markets and a flexible exchange rate that help to absorb external shocks”.

It said that the outcome of the ANC’s elective conference in December would be key to further ratings decisions.

“The affirmation reflects that, while a number of developments point to a weaker fiscal outlook and consequent faster pace of debt accumulation, potential fiscal consolidation measures after the ANC’s elective conference in December could mitigate those trends,” said Fitch.

“Additionally, GDP growth could recover more strongly than currently anticipated if the outcome of the conference is viewed favourably by consumers and businesses.”


Read: R112 billion could be wiped as junk status looms for South Africa

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Fitch keeps South Africa’s credit rating at junk