Government notes S&P decision

Sunday, May 27, 2018

Government has noted Standard & Poor’s (S&P)’s decision to maintain South Africa’s outlook as stable.

“Government notes S&P’s decision to affirm South Africa’s long term foreign and local currency debt ratings at ‘BB’ and ‘BB+’ respectively, and to maintain the stable outlook,” said Treasury on Friday night.

This as the rating agency affirmation indicated that “South Africa’s ratings are constrained by the weak pace of economic growth, particularly on a per capita basis, as well as its large fiscal debt burden and sizable contingent liabilities”.

The agency said that following the recent political transition, "authorities are pursuing key economic and social reforms".

“But we consider the economic and social challenges the country faces as considerable. The ratings are supported by the country's monetary flexibility, large domestic financial sector, and deep capital markets, alongside moderate external debt, with very low levels of external debt denominated in foreign currency,” said the rating agency in its assessment on Friday.

Government said it noted the assessment of challenges and opportunities the country faces in the immediate to long term and is determined to achieve improved ratings in the period ahead.

It said that since the elective conference of the ruling party in December both business and consumer confidence have improved. This is in addition to the February 2018 Budget that further supported the improved investment climate.

It said that in support of inclusive growth underpinned by the National Development Plan (NDP) progress has been made on several fronts.

This includes progress in the appointment of a new board and permanent chief executive officer at Eskom, in addition to the signing of all outstanding power-purchase agreements with independent power producers (IPPs).

New boards have also been appointed at South African Express (SAX), Denel and Transnet, coupled with ongoing appointments of competent individuals at executive management level.

Also an acting Commissioner has been appointed at the South African Revenue Service (SARS), while a new head of the Directorate for Priority Crime Investigation (the Hawks) has also been appointed.

“To date, the Budget Facility on Infrastructure has considered 64 large infrastructure projects of which 38 has been assessed,” said Treasury.

In addition, public sector wage negotiations were concluded on 21 May 2018 with the tabling of a multi-year wage agreement without disrupting the compensation ceiling.

“Going forward, government will engage S&P on their areas of concern. Taking steps to improve business confidence even further, achieving higher economic growth, fast-tracking the SOC reform agenda, and ultimately restoring the country’s investment grade credit rating, remains a top priority.”

Government said it will enhance its collaboration with business, labour and civil society in positioning South Africa as an attractive investment destination while also creating an enabling policy environment for inclusive economic growth.

In March, another rating agency, Moody’s announced its affirmation of South Africa’s investment grade credit rating. Its announcement also revised the country’s credit outlook from negative to stable. –