Fitch affirms SA’s bad rating, despite Ramaphoria
Fitch has affirmed South Africa’s sub-investment grade credit rating, citing signs of improvement in governance and prospects of a mild cyclical upturn.
But the credit rating agency voiced worries about rising debt and difficulties at state-owned firms. It puts both South Africa’s foreign and local currency debt at BB+ – one notch below investment grade, with a stable outlook.
It noted “indications [are] that financial challenges at key stateowned enterprises remain substantial and ... that government debt has yet to stabilise”.
Investor sentiment has picked up since President Cyril Ramaphosa pledged to clean up the graft. But Fitch, which has pencilled in economic growth of 1.7% this year, doubts that his efforts would make a difference.
“Current government initiatives are unlikely to improve trend growth significantly, as their implementation and timeline is uncertain and their impact on growth ambiguous,” Fitch said.
The economy suffered its worst quarterly contraction in nine years in the first three months of 2018 in a cautionary reminder of the challenge facing Ramaphosa.
In a reaction to the Fitch statement, Treasury said concluding critical policies such as the mining charter was crucial to improving sovereign credit ratings.
“The recent changes in governance in critical state-owned enterprises and the 2018 budget, which outlined decisive and specific policy measures to strengthen the fiscal framework, are expected to improve the investment climate of SA,” Treasury said. – Reuters