SA long-term rat­ing to stay

Fitch af­firms BB+ with sta­ble out­look

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

RAT­INGS agency Fitch Rat­ings yes­ter­day af­firmed South Africa’s long-term for­eign- and lo­cal-cur­rency is­suer de­fault rat­ings at BB+ with a sta­ble out­look.

Fitch seemed re­cep­tive to gov­ern­ment’s com­mit­ment not to veer off its ex­ist­ing fis­cal tar­gets, de­spite the ex­ec­u­tive changes at the Na­tional Trea­sury.

“As the new fi­nance min­is­ter has em­pha­sised, the gov­ern­ment’s com­mit­ment to ex­ist­ing tar­gets still stands.

“As a re­sult, it is un­likely that the gov­ern­ment will raise its ex­pen­di­ture ceil­ing, which has served as a key an­chor for fis­cal pol­icy.

“The gov­ern­ment is also likely to im­ple­ment some tight­en­ing if, as is ex­pected, rev­enue un­der per­forms, but the ad­just­ment will be in­suf­fi­cient to keep deficit tar­gets on track,” said Fitch.

Warn­ing

The agency, how­ever, warned that South Africa’s rat­ings were weighed down by low gross do­mes­tic prod­uct growth, con­tin­gent li­a­bil­i­ties and de­te­ri­o­rat­ing gov­er­nance.

It raised con­cerns about the ef­fect of the re­cent cab­i­net reshuf­fle on the gov­er­nance of state-owned com­pa­nies (SOEs).

It also warned about the pos­si­ble weak­ened fis­cal con­sol­i­da­tion and re­duced pri­vate sec­tor in­vest­ment as a re­sult of the changes.

“While ef­forts to im­prove the (SOEs’) gov­er­nance frame­work will con­tinue, im­ple­men­ta­tion de­ci­sions, for ex­am­ple on ap­point­ment of se­nior (SOEs’) man­age­ment, will ham­per these ef­forts and could lead to weaker fi­nan­cial po­si­tions of (SOEs) and higher con­tin­gent li­a­bil­i­ties for the (South African) gov­ern­ment.

“Given the weak state of (state-owned com­pa­nies), the prob­lems in (SOEs’) gov­er­nance and the im­por­tance of (SOEs) for the coun­try’s econ­omy and pol­i­tics, the risk that some of this debt will land on the sov­er­eign bal­ance sheet is sub­stan­tial,” it said.

South Africa’s un­em­ploy­ment rate in­creased to 27.7 per­cent in the first quar­ter of this year, com­pared to pre­vi­ous quar­ter, Sta­tis­tics South Africa said yes­ter­day.

The rand briefly dipped be­low R13 to the dol­lar af­ter the Fitch an­nounce­ment. siseko.njobeni@inl.co.za

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