Fitch keeps SA credit ratings unchanged

ALL EYES will now be fixated on S&P Global Ratings and Moody’s Investor Services today after Fitch Ratings yesterday affirmed South Africa’s long-term foreign currency issuer default rating (IDR) at “BB+” with a stable outlook.

The firm also affirmed the country’s long-term local currency IDR at “BB+” with a stable outlook.

Jan Friederich, a primary analyst at Fitch, said in a statement late yesterday that the firm believed the Budget to be presented in February would contain revenue and expenditure side consolidation measures.

“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,” Friederich said.

Fitch, which is the smallest of the big three rating agencies, uses the same ratings scale as S&P. Moody’s and S&P will provide their year-end rating reviews on South Africa later today.

Reshuffle In April, Fitch downgraded the country to “junk status” following a cabinet reshuffle that saw a raft of changes at the National Treasury.

The rating agency said South Africa’s gross domestic product growth could recover more strongly than currently anticipated if the outcome of the ANC conference is viewed favourably by consumers and business.

Fitch, however, said rising net external debt levels that raised the potential for serious financing strains and a failure to implement credible fiscal consolidation to arrest the upward trajectory of government debt to gross domestic product (GDP) ratio would result in negative rating action.

Fitch said it would improve the country’s rating should a substantial strengthening GDP growth and an improvement in governance of state-owned enterprises that were supportive of public finances and investment.

The National Treasury said, by not downgrading the country further, Fitch was providing South Africa with an opportunity to address issues that could lead to an upward revision to the ratings.

“Tangible progress has been achieved on most of the 14 Confidence Boosting Measures and (this) is expected to translate into improved investor confidence,” the Treasury said.