CREDIT RATINGS – SOUTH AFRICA IS SAFE FOR NOW
Amid the news of a 13 year high in South Africa’s unemployment figures and an increase in the the number of job-seekers (a greater proportion of these being people between the ages of 15 and 34), the major news of the week relates to news from ratings agencies Standard and Poor’s (S&P) and Fitch.
Fitch has affirmed South Africa’s long term foreign and local currency debt ratings of ‘BB+’ with a stable outlook. Similarly, S&P’s has taken a decision to maintain South Africa’s long term local currency debt ratings of ‘BBB-‘ (an investment grade rating), whilst affirming the long-term foreign currency rating of ‘BB+’ and the negative outlook on the ratings.
Fitch has cited that despite the country’s credit strengths of deep local capital markets, favourable government debt structure and a track record of fairly prudent fiscal and monetary policy, South Africa’s ratings continue to be weighed down by: · Low potential economic growth; · Sizable contingent liabilities; and · Deteriorating governance of state-owned companies (SOCs). S&P also raises similar concerns, stressing that pace of economic growth is slow and as such poses risks to fiscal consolidation and rising contingent liabilities.
Whilst we now await Moody’s credit assessment (expected to be published soon), the National Treasury has responded positively to the latest announcements, highlighting that the focus is to safeguard confidence and reclaim investment grade ratings.