Reprieve from S&P

Political transparency noted as a plus

S&P GLOBAL Ratings’ decision to hold South Africa’s foreign currency sovereign credit rating at BBB- demonstrates that South Africans working together can achieve remarkable outcomes‚ the National Treasury says.

According to S&P‚ the ratings were supported by their assumption that South Africa would experience continued broad political and institutional stability, as well as macroeconomic policy continuity.

Treasury noted that the agency also took into account the view that the country would maintain fairly strong and transparent political institutions and deep financial markets.

However‚ while South Africa had strengths as a country‚ it also had various weaknesses that the government was addressing and would continue to address to achieve its goal of reducing inequality‚ poverty and unemployment‚ Treasury added.

Some of the weaknesses highlighted by S&P were:

● South Africa largely depends on resident and nonresident purchases of rand-denominated currency debt to finance the fiscal and external deficit.

● Growth continues to be a weakness and the agency thinks that this has been exacerbated by rising political noise that has distracted from growth-enhancing reforms.

● According to S&P‚ the negative outlook reflects the potentially adverse consequences of persistently low GDP growth for the public sector balance sheet.

● South Africa continues to have a structurally high current account deficit that relies on volatile flows for financing.

● S&P stated that the country’s longstanding skills shortage‚ adverse terms of trade‚ and the private sector’s preference to delay investment are adding to poor growth.

“Jointly with business‚ labour and the civil society‚ government remains committed in improving investor and consumer confidence through fast-tracking the implementation of the structural reforms on growth.

“Government policy continues despite rising political noise‚” Treasury said. — TMG Digital