Ratings agency Fitch Ratings has kept South Africa’s long-term foreign and local currency debt ratings at \u2018BB+\u2019 – commonly known as “junk” – with a stable outlook.<\/p>\n
Fitch, which downgraded SA to junk status in April, was the first of the three major ratings agencies to announce its November review of SA’s credit rating.<\/p>\n
Standard & Poor\u2019s and Moody\u2019s are set to make their announcements on Friday.<\/p>\n
National Treasury said in a statement on Thursday that it had “noted Fitch’s decision not to further downgrade South Africa deeper into \u2018junk status'”.<\/p>\n
“By not downgrading the country further, Fitch is providing South Africa with an opportunity to address issues that can lead to an upward revision to the ratings,” Treasury said.<\/p>\n
“While Fitch\u2019s ratings imply that South Africa is still in line with other emerging markets in the same ratings category, the implications are huge for the country.<\/p>\n
“A \u2018junk status\u2019 ratings has implications for the economy, state debt costs, state owned companies and the ordinary man on the street,” it said.<\/p>\n
Since April 2017, when Fitch downgraded the country to “junk status”, SA has seen a recession, borrowing costs have increased, and revenue has underperformed, Treasury said.<\/p>\n
“Therefore, government and the country collectively cannot afford to become complacent about these rising risk exposures,” it said.<\/p>\n
ANC conference\u00a0<\/strong><\/p>\n In its review announcement, Fitch said that South Africa’s ratings were “weighed down by low trend growth, sizeable government debt, contingent liabilities and deteriorating governance standards”.<\/p>\n However, it also noted that these weaknesses were “balanced by a favourable government debt structure, deep local capital markets and a flexible exchange rate that help to absorb external shocks”.<\/p>\n It said that the outcome of the ANC’s elective conference in December would be key to further ratings decisions.<\/p>\n “The affirmation reflects that, while a number of developments point to a weaker fiscal outlook and consequent faster pace of debt accumulation, potential fiscal consolidation measures after the ANC’s elective conference in December could mitigate those trends,” said Fitch.<\/p>\n “Additionally, GDP growth could recover more strongly than currently anticipated if the outcome of the conference is viewed favourably by consumers and businesses.”<\/p>\n