SA’S credit rat­ing at risk due to ten­sions

Lesotho Times - - Business -

JO­HAN­NES­BURG — Po­lit­i­cal up­heavals in South Africa pose a risk to its sov­er­eign credit rat­ing, rat­ings firm m Stan­dard & Poor Poor’ss said yes­ter­day, rday, a day af­ter Pres­i­dent Ja­cob ob Zuma (pic­tured) sur­vived an n im­peach­ment mo­tion in par­lia­mentent for ig­nor­ing the con­sti­tu­tion.ution.

S&P saidd last week’s con­sti­tu­tional nal court rul­ing that t Zuma had breached the he con­sti­tu­tion by ig­nor­ing nor­ing an or­der to re­pay ay some of the $16 6 mil­lion in state tate funds spen­tent on ren­o­vat­vat­ing his home ome and the sub­seb­se­quent po­lit­i­calti­cal fall­out could ould di­vert gov­ern­ment’s at- ten­tion from im­ple­ment­ing growth poli­cies.

Zuma came through the im­peach­ment move thanks to the African Na­tional Congress’s big ma­jor­ity in the 400-seat assem­bly.

“Re­cently we have see seen fo­cus shift to po­lit­i­cal is­sues in par par­lia­ment and the Con­sti­tu­tional Cou Court, and this could di­vert gov­ernm gov­ern­ment’s at­ten­tion from is­sues ar around pol­icy im­ple­men­ta­tion,” as­so­ciate di­rec­tor for sovereignso­vere rat­ings at S& S&P Gard­ner Rusike said at a conferenceconfer in Jo­han­nes­burg.han The rand re­lin­quished ear­lier­gains as i nvestors cheered a court rul­ing that Zuma breached the con­sti­tu­tion by ig­nor­ing a di­rec­tive to pay for some of the state-funded up­grades to his home against the dol­lar, turn­ing weaker af­ter S&P said weak eco­nomic growth re­mained a pres­sure point on South Africa’s credit rat­ing.

The cur­rency hit a ses­sion low of 15.2800 to the green­back, down 1.1 per­cent from Tues­day’s New York close of 15.1050.

S&P cur­rently rates the debt of Africa’s most in­dus­tri­alised econ­omy just one notch above sub in­vest­ment grade, the same level as fel­low rat­ings agency Fitch. Moody’s has it two notches above junk, but on re­view for a down­grade.

S&P’S said South Africa needed to grow at much quicker rate if hoped to avoid a down­grade, and that state firms re­liant on gov­ern­ment funds re­mained a risk to the coun­try’s rat­ing.

Last month, the cen­tral bank trimmed its 2016 growth forecast to 0.8 per­cent from the 1.5 per­cent it forecast in Novem­ber, say­ing that house­hold debt, elec­tric­ity short­ages and weak global growth were per­sis­tent neg­a­tive in­flu­ences.

Rat­ings agen­cies are con­cerned the gov­ern­ment might have to bor­row more to pro­vide fund­ing for cash strapped state firms.

“Growth is im­por­tant for the rat­ings agen­cies (and) the debt to GDP ra­tio is some­thing they look at closely,” ETM mar­ket an­a­lyst Ri­cardo Da Ca­mara said.

“Even if your debt stays con­stant but your growth is weak­en­ing that ra­tio will in­crease, it just means a greater bur­den on the gov­ern­ment in terms of be­ing able to re­pay its debt and ser­vice its debt.”

Mean­while, Mark Lamberti, the chief ex­ec­u­tive of­fi­cer of Im­pe­rial Holdings Ltd, the coun­try’s sixth-largest com­pany by rev­enue said South Africa’s po­lit­i­cal lead­er­ship needs to be more ac­count­able and in­spire con­fi­dence among busi­ness lead­ers to boost in­vest­ment and eco­nomic growth.

The rul­ing African Na­tional Congress’s re­sponse to a court judg­ment that Pres­i­dent Ja­cob Zuma failed to up­hold the con­sti­tu­tion “showed us that we are liv­ing in an en­vi­ron­ment which has got no ac­count­abil­ity or con­se­quence,” Mark Lamberti told Bloomberg this week.

“If you’ve got a coun­try seem­ing to be run with­out ac­count­abil­ity or con­se­quence, it’s a prob­lem,” Lamberti said. “If there was slightly more con­fi­dence that we’d be mov­ing in the right di­rec­tion, you’d get busi­ness pre­pared to take a slightly longer view on in­vest­ment.”

— Reuters/bloomberg

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