Next S&P rating may be downgrade

South Africa’s sovereign rating risked being downgraded due to concerns about the postponement of fiscal consolidation and lack of clarity around land expropriation, a senior S&P Global Ratings analyst said yesterday.

Recession-hit SA last week unveiled a bleak budget that saw wider budget deficits and low growth. SA is rated “junk” by S&P Global Ratings and Fitch.

“It is on those two aspects we would consider lowering the rating,” Ravi Bhatia, director Sovereign Ratings at S&P, said, referring to land reforms and fiscal consolidation.

The next S&P rating review would be November 23.

Bhatia said fiscal consolidation had been postponed in the medium-term budget policy statement last week.

“This has been a trend for many years. That the deficits in the MTBPS are being revised upwards … that feeds into the debt stock where it rises towards 60% with no clear stabilisation.

“And if you look at interest payments as a percentage of revenues, they’re above 10%, and whether they’ll go above our thresholds of 15% is something to watch.” – Reuters