Ratings firm Fitch has announced that it is holding South Africa’s local and foreign debt ratings at BB+, the first level of sub-investment grade, with a stable outlook.<\/p>\n
The firm maintained that South Africa’s ratings are weighed down by low trend GDP growth, sizeable contingent liabilities and deteriorating governance.<\/p>\n
“Positively, they are supported by deep local capital markets, a favourable government debt structure and a track record of fairly prudent fiscal and monetary policy,” it said.<\/p>\n
“A cabinet reshuffle at the end of March, which triggered an earlier downgrade of South Africa’s ratings, is likely to undermine governance of state-owned enterprises (SOEs), weaken fiscal consolidation and reduce private sector investment as a result of weaker business confidence.<\/p>\n
“While efforts to improve the SOE governance framework will continue, implementation decisions, for example on appointments of senior SOE management, will hamper these efforts and could lead to weaker financial positions of SOEs and higher contingent liabilities for the government.”<\/p>\n
Fitch said that it’s received the message that\u00a0finance minister Malusi Gigaba has emphasised that government’s commitment to existing fiscal targets still stands.<\/p>\n
“As a result, it is unlikely that the government will raise its expenditure ceilings which have served as a key anchor for fiscal policy. The government is also likely to implement some tightening if, as is expected, revenue under-performs but the adjustment will be insufficient to keep deficit targets on track.,” it said.<\/p>\n
The ratings firm also said that it has no reason to believe that the government’s message of “radical economic transformation” will change anything fundamentally, or move the government away from long-term growth.<\/p>\n
“Senior ANC and government leaders have emphasised that the government’s recent rhetoric of ‘radical socioeconomic transformation’ signals no fundamental change and that the government remains focused on the long-standing goal of inclusive growth.<\/p>\n
“Documents released ahead of the ANC policy conference in June also indicate policy continuity, including on the sensitive issue of land expropriation,” it said.<\/p>\n
The following aspects are most likely to result on both negative or positive rating action:<\/p>\n
Negative rating action:<\/strong><\/p>\n Positive rating action:<\/strong><\/p>\n\n
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