Ratings firm S&P Global Ratings on Friday (24 May) kept its rating for South Africa unchanged, taking a wait-and-see approach following the general elections earlier in the month.
S&P’s affirmed South Africa’s long term foreign currency debt rating at ‘BB’ and local currency debt rating at ‘BB+’ while maintaining the stable outlook.
South Africa’s foreign and local currency credit ratings by S&P remain below investment grade.
It comes as the country on Saturday rolls out the red carpet for the inauguration of Cyril Ramaphosa as the sixth democratically elected president.
The president is expected to give the country and the international community a snap into his vision and intent during his term of office.
One of the key focus areas of this address will be on how with the entire country, he can build on past achievements and work even harder to tackle poverty, inequality and unemployment.
Ramaphosa is also expected to touch on ways to strengthen the country’s democracy and continued efforts to build an inclusive economy that is on a trajectory of growth, development and a prosperous future.
Approximately 32,000 people are expected to converge on Loftus stadium, with an additional 4,500 VIP guests. These will include Heads of State and Government from the regional Southern Africa Development Community and the continent.
According to S&P, the ratings affirmation reflects the following drivers:
- South Africa’s economic growth continues to remain well below its emerging market peers on a per capita basis.
- With the elections over, the government is likely to focus more on new policy initiatives that will aim to support firmer economic growth and reform state-owned companies.
- South Africa’s fiscal position remains weak, with sizable fiscal deficits, a large debt burden, and sizable contingent liabilities, largely tied to the energy utility Eskom.
- South Africa’s financial sector is profitable and well capitalised, although partially reliant on short-term funding.
The rating agency anticipates that the implementation of reforms in 2019 should boost investor confidence, investment, and growth slightly.
The agency acknowledged the president’s economic and recovery plan announced in September 2018 – to boost growth without diverging from the fiscal stance by, among other measures, re-prioritising expenditures, pursuing a potential multilateral investment programme, gazetting a new mining charter, and reforming the visa regime to boost tourism.
“The main focus for government remains to regain South Africa’s investment-grade status to make the country an attractive investment destination,” the government said in a statement.
“This will be achieved by enhancing policy certainty and credibility, implementing growth-enhancing economic reforms, lowering the debt burden as well as restoring good governance and financial stability at public institutions and State Owned Companies (SOCs), specifically Eskom,” it said.
Read: Ramaphosa’s cabinet wishlistRamaphosa’s cabinet wishlist