Any attempt to undermine South Africa\u2019s key institutions like treasury would see the country likely downgraded to junk status, rating agency Standard & Poor\u2019s (S&P) indicated on Thursday.<\/p>\n
Without threatening a downgrade in a careful address, S&P sub-Saharan Africa MD Konrad Reuss told the Thomson Reuters Africa Summit in Cape Town on Thursday that any attempt to undermine South Africa\u2019s institutions would be \u201ca negative\u201d for the agency.<\/p>\n
Identifying key institutions like Treasury, the SA Reserve Bank and the courts, he said \u201cany attempts to undermine these institutions will be a negative from the ratings agencies\u201d.<\/p>\n
S&P and Fitch Ratings both have South Africa\u2019s credit rating at BBB- with a negative outlook, which is one notch above junk status. Moody\u2019s rating is slightly better at Baa2 with a negative outlook.<\/p>\n
S&P is set to deliver its next ratings review on December 2.<\/p>\n
Reuss said South Africa\u2019s most fundamental change that affects its credit rating focuses on how politics is threatening South Africa\u2019s policies.<\/p>\n
\u201cWhat has (changed) … is that political tension and turmoil has come to the fore,\u201d he said. \u201cIt is a game changer from South Africa 10 years ago.<\/p>\n
\u201cThere is politics and then there are policies,\u201d he said, explaining that in South Africa you could always rely on the policies.<\/p>\n
\u201cWe are not in that situation now,\u201d he said. \u201cIt is more than just political noise.\u201d<\/p>\n
Referring to S&P\u2019s June review of SA, he said: \u201cFor the first time ever, we felt obliged to highlight political risk and tension. This is not about political noise. Here we have political tension that can undermine structural reforms that can become a serious risk to South Africa\u2019s credit story.\u201d<\/p>\n
His latest economic outlook comes days after Finance Minister Pravin Gordhan\u2019s fraud summons over the early retirement of former South African Revenue Service deputy commissioner Ivan Pillay.<\/p>\n
It also comes a day before public protector Thuli Madonsela was set to release her report on state capture involving allegations that the Gupta family acted on behalf of President Jacob Zuma when they allegedly offered deputy finance minister Mcebisi Jonas the job of finance minister. Zuma\u2019s office said on Thursday that it had obtained an interdict that prevented her from releasing the report.<\/p>\n
Responding to the latest news regarding Zuma, Reuss said this \u201cjust highlights that the political risk has come to the fore more than ever\u201d, adding that Gordhan\u2019s fraud summons shows that \u201ceverything is not business as usual in this situation\u201d.<\/p>\n
Reuss said South Africa must sustain its current fiscal discipline and retain a team effort in its fast-tracked reform of state-owned enterprises (SOEs).<\/p>\n
\u201cIt is critical at this juncture that the budget objectives from February are achieved,\u201d he said.<\/p>\n
\u201cThe minister and his team are targeting a faster and consolidated reform. It hinges on a team.\u201d<\/p>\n
Reuss also said S&P was keeping a close eye on economic growth in South Africa. The SA Reserve Bank sees the country growing by 0% in 2016 and S&P wants to see this change.<\/p>\n
\u201cWe are focusing on growth,\u201d he said. \u201cIs it going to be lower again as expected? There is a risk if growth isn\u2019t going to recover.\u201d<\/p>\n
What S&P said in June<\/strong><\/p>\n In its June 3 review of the country, S&P said that its negative outlook reflects the potential adverse consequences of low growth and signals that it could lower its ratings on South Africa this year or next if policy measures do not turn the economy around.<\/p>\n \u201cWe could lower the ratings if GDP growth does not improve in line with our current expectations,\u201d it said.<\/p>\n South Africa\u2019s growth has stagnated in 2016, with the SA Reserve Bank expecting 0% growth for the year.<\/p>\n Credit ratings have a significant impact on South Africa as it impacts its borrowing costs. This is because ratings are used by sovereign wealth funds, pension funds as well as other investors to determine the credit worthiness of a country.<\/p>\n \u201cRising political tensions are accentuating vulnerabilities in the country\u2019s sovereign credit profile,\u201d it said in its June review.<\/p>\n \u201cPolitical tensions have increased in South Africa since the removal of former Finance Minister Nhlanhla Nene on December 9, 2015, the Constitutional Court ruling against President Jacob Zuma on March 31, 2016 and periodic disputes between key government institutions and within the ANC.<\/p>\n \u201cWe believe that these political factors – if they continue to fester – could weigh more on investor confidence than inconclusive labour or mining sector reform.<\/p>\n \u201cWe base our rating affirmation on the expectation that they will be held in check, albeit in the context of political jockeying in the run-up to local government elections in August of this year and the ANC\u2019s elective conference in December 2017.\u201d<\/p>\n News24<\/a><\/p>\n More on the economy<\/p>\n