https://www.engineeringnews.co.za
Construction|Projects
Construction|Projects
construction|projects

South Africa must do 'a lot more' work to improve credit ratings – S&P

12th April 2019

By: News24Wire

  

Font size: - +

It has been two years since Standard & Poor's (S&P) downgraded South Africa's foreign currency debt to junk status, and the sticking point is its weak economic performance, an official of S&P Global Ratings has said.

Speaking during a panel discussion at the S&P Global Annual South Africa Conference held in Cape Town on Thursday, associate director of sovereign and IPF ratings Gardner Rusike shared views on SA's economic growth.

"The major point for SA's Achilles heel is weak economic performance, which impacts on ratings negatively," Rusike said, who added that poor economic growth is constraining ratings from improving from junk status.

S&P first downgraded the foreign currency debt from BBB- to BB+ in April 2017, following a Cabinet reshuffle by former president Jacob Zuma which resulted in the removal of finance minister Pravin Gordhan and deputy minister Mcebisi Jonas. At the time, S&P said that the move by Zuma had put at risk fiscal and growth outcomes.

In November 2017, S&P downgraded the foreign currency debt to BB and downgraded local currency debt from BBB- to BB+. The ratings agency had expected further deterioration of public finances and the economic outlook, Fin24 previously reported.

'A lot more' to be done

S&P projects SA's growth to be 1.6% this year. Rusike said "a lot more needs to be done" to get growth on a higher path to have a positive effect on the rating.

"The slowdown in growth has put pressure on the fiscal performance and the sovereign rating," he emphasised.

If growth remains negative, or lower than 5% - it poses a risk to public finances, fiscal consolidation and debt stabilisation and is ultimately a downside risk to the credit rating, he said.

Elections

The changes in government administration last year, and adjustments expected this year following elections, could be an opportunity for government to consolidate reform efforts that could result in higher growth and have a positive impact to the ratings, Rusike said.

The change in sentiment due to the construction of a new administration could translate into private sector investment and by extension higher growth, but this will take time, Rusike said.

Politics affects policy choices, which in turn affect economic outcomes, he added. "A reform-minded and united majority party will be good for the economic outlook."

It is important that reforms are implemented to have a better economic outlook, he stressed.

Apart from economic growth, the fiscal performance of the government is also an important factor influencing the credit rating, Rusike said. This has to do with government's ability to reduce the fiscal deficit and stabilise debt.

Edited by News24Wire

Comments

Showroom

SBS Tanks
SBS Tanks

SBS® Tanks is a leading provider of innovative water security solutions with offices in Southern Africa, East and West Africa, the USA and an...

VISIT SHOWROOM 
Flameblock
Flameblock

FlameBlock is a proudly South African company that engineers, manufactures and supplies fire intumescent and retardant products to the fire...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.092 0.15s - 180pq - 2rq
Subscribe Now