SA escapes credit rating downgrade

JUNE 4, 2016

Government has welcomed credit rating agency Standard & Poor’s (S&P) decision to affirm South Africa’s credit rating.

This comes after S&P on Friday affirmed SA’s sovereign debt rating at one notch above junk, a move analysts and government have welcomed and said it gives the country some breathing space. The agency put SA’s long and short term ratings at ‘BBB-/A-3’ and ‘BBB+/A-2’ respectively.

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

Treasury said the benefit of this decision is that South Africa is given more time to demonstrate further concrete implementation of reforms that are underway aimed at achieving higher levels of inclusive growth and place public finances on a sustainable path.

“The rating outcome demonstrates that South Africans can unite, especially during difficult times to achieve a common mission,” said the Treasury.

It thanks all social partners for their efforts towards achieving this positive outcome and urged stakeholders to continue its close working relationship with government over the period ahead.

Negative outlook maintained S&P however maintained the negative outlook on the rating, citing concerns about economic growth and warned foreign and local currency bond could lower the rating by year-end or next year, if policy measures do not turn the economy around.

Alternatively, S&P could revise the outlook to stable if they observe policy implementation that leads to an improved business confidence environment and increased private sector investment and ultimately result in higher levels of growth.

“Government is aware that the next six months are critical and there is a need to step up the implementation of the 9-point plan and other measures to boost the economy,” said Treasury.

Government, business and labour would collectively intensify efforts aimed at:

·         Restoring confidence and boosting investment amongst local and international investors;

·         Unblocking obstacles to faster employment growth in key sectors; and

·         Undertaking fiscal, State-Owned Companies (SOCs) and regulatory reforms.

Treasury emphasised that united effort towards concrete delivery in these priorities will lay a solid foundation for all South Africans to break through, in a sustainable manner, the cycle of poverty, inequality and unemployment.

Business applauds the move

Meanwhile, big business has applauded S&P non-downgrading of South Africa.

The Banking Association South Africa noted that over the past six months, business, labour and the government have worked together as a united front on various initiatives aimed at averting a ratings downgrade, and creating higher levels of sustainable, inclusive growth.

“The confirmation of the country’s sovereign credit rating at investment grade by S&P is encouraging news in this regard, and important as this is, it is one milestone on the road to ensuring growth at levels necessary to meaningfully address unemployment, poverty and inequality,” the association said. 

“We are thus energised by the ratings announcement to work even harder together to ensure inclusive growth. We also remain committed to working with social partners to support fiscal prudence and policy certainty as these are vital foundations for inclusive growth,” it said

– SAnews.gov.za