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SA must do ‘a lot more’ work to improve credit ratings – S&P

It has been two years since S&P downgraded SA’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.

‘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.


The changes in government administration last year, and adjustments expected this year following elections, could be an opportunity for government to consolidate reform efforts 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.


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