S&P gives update on South Africa following Ramaphosa’s election as president
Ratings agency Standard & Poor’s has acknowledged the resignation of Jacob Zuma as president and subsequent appointment of Cyril Ramaphosa.
In a statement released on Thursday afternoon, S&P said that the new leadership could bring confidence and faster implementation of key reforms already undertaken.
“However, Mr.Ramaphosa and his administration will require time to design and implement measures to improve economic growth and stabilize public finances, given the structural and institutional challenges that South Africa faces,” it said.
“Economic growth remains low, impeding the path to fiscal consolidation. We think the government will attempt to introduce offsetting measures in an effort to improve budgetary outcomes, but these may not be sufficient to stabilize public finances in the near term.”
“We have determined, based solely on the developments described herein, that no rating actions are currently warranted.”
S&P Global Ratings and Fitch Ratings cut the country’s debt to junk in 2017 after Zuma fired the respected Pravin Gordhan as his finance minister.
Moody’s Investors Service put the nation on review for a downgrade in November, and is due to deliver its assessment in March.
Another reduction of the local-currency bond rating to junk would trigger an exclusion of South Africa’s rand debt from Citigroup’s World Government Bond Index and spark a selloff by investors tracking the gauge.
Avoiding that prospect will require the new administration to show its commitment to tackling corruption, bolstering growth and sticking to its expenditure ceiling and budget deficit-reduction plans.
Read: South Africa is R1 away from undoing Jacob Zuma’s entire second term as president
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