Negative outlook for SA economy

Responding to Fitch Ratings latest rating assessment of South Africa, the government said it recognised that the country’s economic growth needs to be accelerated, and that it is addressing the issues raised by the ratings agency at the highest level.

Fitch has affirmed South Africa’s long-term foreign and local currency Issuer Default Ratings at “BBB” and “BBB+” respectively, and also affirmed the negative outlook.

Fitch said key drivers for the rating decision included weak economic growth potential on the back of electricity supply constraints and external financing vulnerabilities. The country’s deep local markets enhance fiscal financing flexibility, the ratings agency said.

It added that the structure of government debt, 91% of which is denominated in local currency, limited exchange rate and refinancing risks.

The ratings agency said an improvement in the growth outlook and reduction in the current account and budget deficits would assist in stabilising the rating.

In a statement issued by the National Treasury at the weekend, the government admitted that the country’s economic growth performance needs to be higher in order to address South Africa’s challenges. Resolving the energy challenge is a priority, it said.

It pointed out that the government’s package to support Eskom is progressing, and that plans announced last week to allocate R23bn into the company and convert a R60bn loan into equity are firmly on track.

“The implementation of priority reforms of the National Development Plan remains a key objective of government. Growth enhancing initiatives and programmes, targeting key sectors of the economy such as the energy sector, are being implemented to support the country’s economic competitiveness,” said the National Treasury.

It added that government will broadly stick to its expenditure with regards to the fiscal position.

Fin24

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Negative outlook for SA economy