S&P gives South Africa welcome breathing space

THE DECISION by ratings agency S&P Global to affirm South Africa’s longterm foreign and local currency debt ratings at BB and BB+ respectively, and maintain the stable outlook, affords South Africa a chance to demonstrate further concrete implementation of measures aimed at turning around the growth trajectory, the National Treasury said.

According to S&P, the rating affirmation was underpinned by anaemic economic growth in 2018 and high contingent liabilities continuing to weigh on South Africa’s fiscal prospects, and the new government was pursuing a series of economic reforms that should help boost the economy from 2019, despite structural impediments, chronic skills shortages, and high unemployment.

The stable outlook reflected S&P’s view that “the South African government will pursue a range of economic, social, and fiscal reforms, albeit over an extended period of time”.

S&P now expected South Africa’s gross domestic product (GDP) growth to average 0.8 percent in 2018 and 1.8 percent in 2019; these forecasts were slightly higher than the 2018 MTBPS assumptions.

“The government notes S&P’s assessment of challenges and opportunities the country faces in the immediate to long term and remains determined to achieve improved ratings in the period ahead,” the Treasury said in a statement.

“The decision affords South Africa a chance to demonstrate further concrete implementation of measures that are aimed at turning around the growth trajectory. These measures include the reprioritisation of public spending, the creation of the infrastructure fund, as well as partnerships for growth,” it said.

S&P had highlighted a couple of risks, including subdued economic growth, which could lead to the rating being lowered. The government was mindful of these.