Ratings agency Fitch has warned the South African government against making populist “quick fix” decisions ahead of the 2016 elections which could put the economy at risk.<\/p>\n
Fitch Managing Director Ed Parker was quoted by Reuters\u00a0<\/a>saying that the government may be tempted to “react to the discontent about insufficient improvement to living standards by pushing costly social programmes” ahead of the elections.<\/p>\n “Authorities may feel, if they have a poor showing, that there is a need for quick fixes like the introduction of a high minimum wage<\/a> that would appear to help the poor but may also discourage investment,” he said<\/p>\n Fitch, along with fellow rating group Standard & Poor’s, currently has South Africa rated at one notch above junk status – though the former has a stable outlook, while S&P is at negative.<\/p>\n Both firms have been in communication with the South African government about the economic conditions in the country – which are bleak – and are expected to make assessments in the coming months.<\/p>\n South Africa is swamped with a myriad of issues, getting battered between external, global problems, as well as internal conflicts and policy issues.<\/p>\n The country’s economic growth is expected to be as low as 0.6% in 2016.<\/p>\n A junk rating would further compound South Africa’s woes, increasing the cost to borrow funds, with many investors and hedge funds being prohibited by policy from investing in the country.<\/p>\n SA junk status: \u201cExpect the worst\u201d<\/a><\/strong><\/p>\n Junk status for South Africa? It\u2019s not looking good<\/a><\/strong><\/p>\n What the Reserve Bank thinks about SA junk status chances<\/a>.<\/strong><\/p>\nMore on the economy<\/h3>\n