South Africa would welcome an upgrade of its credit score, but Finance Minister Enoch Godongwana \u2014 who says ratings-company bias against the continent is real \u2014 isn\u2019t holding his breath.<\/p>\n\n\n\n
\u201cMy sense is that it\u2019s not a foregone conclusion,\u201d Godongwana said in an interview in Cape Town on the eve of an update by S&P Global Ratings on its latest assessment of the country. <\/p>\n\n\n\n
\u201cIt\u2019s going to be a bonus if they give us a better rating.\u201d<\/p>\n\n\n\n
Godongwana spoke a day after delivering a budget that stoked investor optimism that the country\u2019s finances have finally turned a corner. <\/p>\n\n\n\n
S&P, which assesses South Africa\u2019s long-term foreign debt at BB-minus \u2014 three notches below investment grade \u2014 with a positive outlook, is scheduled to review the rating on Friday.<\/p>\n\n\n\n
The minister\u2019s medium-term budget included the formal adoption of a 3% inflation target and better-than-expected revenue collection, while maintaining the forecast that debt as a share of gross domestic product would peak this year and then decline.<\/p>\n\n\n\n
The news fueled a rally in South African assets, driving the rand below 17 to the dollar for the first time since February 2023. <\/p>\n\n\n\n
Yields on the government\u2019s 10-year benchmark bond declined, touching 8.6%, compared with 8.8% before the announcement on Wednesday.<\/p>\n\n\n\n
Several private-sector economists said the budget would tip the balance in South Africa\u2019s favor for an S&P upgrade. <\/p>\n\n\n\n
Godongwana agreed the current rating doesn\u2019t reflect the nation\u2019s progress in improving its fiscal position. <\/p>\n\n\n\n
Rival companies Moody\u2019s Ratings and Fitch Ratings rate the country sub-investment grade Ba2 and BB- respectively.<\/p>\n\n\n\n
\u201cThey are behind the curve,\u201d he said, given the nation\u2019s improved debt trajectory over the past five years. \u201cThey might find one minor issue: For instance, our measurement of debt is not the same as theirs.\u201d<\/p>\n\n\n\n
Godongwana also shared the frustration of his counterparts in the region that rating agencies are systematically grading African nations more harshly than their peers in other parts of the world, and this translates into weaker credit ratings, along with higher borrowing costs. <\/p>\n\n\n\n
Ghana and Zambia, which both defaulted on their loans partly due to the Covid-19 pandemic, have been particularly vocal in their criticism of the ratings agencies for downgrades.<\/p>\n\n\n\n
\u201cThere is already a bias against the African continent by multinational institutions, by the investing community, by rating agencies,\u201d he said. <\/p>\n\n\n\n
An expert panel report to the Group of 20 summit in Johannesburg next week will have \u201cdata to prove that,\u201d the minister said.<\/p>\n\n\n\n
\u201cCountries with the same fiscal metrics get a better rating than Africans,\u201d he added. \u201cThere\u2019s little default by African countries, by the way. They service their debt \u2014 even if people can\u2019t eat food \u2014 but they service their debt.\u201d<\/p>\n\n\n\n
Godongwana\u2019s budget also included a commitment to finalize a proposal for the adoption of a fiscal anchor next year, designed to maintain the government\u2019s discipline over public finances.<\/p>\n\n\n\n
South Africa already aims for a primary budget surplus \u2014 where revenue exceeds non-interest spending \u2014 but Godongwana said he was wary of binding the government to numerical fiscal targets that limit its policy options.<\/p>\n\n\n\n
He proposes a framework containing a range of policies to guide the fiscal path that gave lawmakers oversight and avoided \u201ctechnocrats overruling politicians.\u201d<\/p>\n\n\n\n
That could work well under South Africa\u2019s current coalition government, which faced a severe test earlier this year when opposition to his proposal for a tax increase delayed the 2025 budget for several months.<\/p>\n\n\n\n
The so-called government of national unity managed to stay together and a fiscal framework could play an important role in keeping the coalition together.<\/p>\n\n\n\n
\u201cThe good thing about that: it can also make the GNU enduring because there\u2019s not going to be bickering over the next five years over policy, because policy is locked,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
South Africa would welcome an upgrade of its credit score, but Finance Minister Enoch Godongwana isn\u2019t holding his breath, saying it will be a bonus if it happens.<\/p>\n","protected":false},"author":59,"featured_media":816639,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[24113,1513,11765],"class_list":["post-843168","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-enogh-godongwana","tag-rating","tag-sp-global"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/843168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=843168"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/843168\/revisions"}],"predecessor-version":[{"id":843169,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/843168\/revisions\/843169"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/816639"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=843168"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=843168"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=843168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}