Gvt welcomes rating agency decision

JUNE 9, 2016

Government has welcomed rating agency Fitch Ratings’ decision to affirm South Africa’s long term foreign and local currency debt at ‘BBB-’ and ‘BBB’ respectively, saying the decision shows that all sectors can work together for the common good of the country, said National Treasury.

This, as rating agency Fitch announced its decision on Wednesday.

This follows the downgrade it announced in December 2015.

The foreign currency bond rating remains one notch above sub-investment grade whereas the domestic currency bond rating remains two notches above sub-investment grade.

According to Fitch, affirming the ‘BBB-’ rating with a stable outlook reflects low Gross Domestic Product (GDP) growth trends, significant fiscal and external deficits and debt levels balanced by strong policy institutions, deep local capital markets and a favourable government debt structure.

“The decision affords South Africa a narrow window to demonstrate further concrete implementation of reforms that are already underway aimed at turning around the growth path and place public finances on a more sustainable path.

“Once again, this rating outcome demonstrates that during difficult times, South Africa – government, labour, business and civil society – can work together to achieve a common goal,” said Treasury on Wednesday.

Government further expressed its gratefulness to all social partners for their efforts towards achieving this positive outcome, while also urging everyone to continue the close working relationship over the challenging period ahead.

Government also added that it is mindful of the risks highlighted by Fitch that could lead to the rating being lowered.

“Government is mindful of these and fully aware that the next several months are critical. We are stepping up the implementation of the Nine-Point Plan and other measures to boost the economy.

Efforts that government is taking include restoring confidence and boosting investment amongst local and international investors; unblocking obstacles to faster employment growth in key sectors; and undertaking fiscal, State-Owned Company (SOC) and regulatory reforms.

President Jacob Zuma’s meeting with Finance Minister Pravin Gordhan and senior government officials this week was an expression of the government’s commitment to accelerate implementation of growth-inducing measures and to strengthen cohesion in government.

“Fitch’s decision is testament to the fact that despite the structural constraints we face, South Africa remains an attractive investment destination relative to its peers. We are a country that has very liquid financial markets and a well-capitalised banking sector, complementary monetary, fiscal and exchange rate policies, massive natural resource base, as well as strong and transparent macro institutions.

“South Africa continues to play an important role in supporting development in the African continent. These are some of the factors that have enabled the South African economy to demonstrate much greater resilience in the face of exceptionally difficult global and domestic economic conditions,” said National Treasury.

The decision by Fitch Ratings follows on Standard and Poor's (S&P) decision to maintain South Africa's investment rating decision, last week.

President Zuma recently welcomed S&P’s decision, saying the decision demonstrates “that working together we can reignite our economy, attract investment and create jobs for our people”.

– SAnews.gov.za