Some opposition parties say they are not surprised by S & P Global Ratings deciding to maintain the country’s long term foreign and local currency debt ratings at junk status.
According to S&P, South Africa’s fiscal position remains weak exacerbated by the R500 billion stimulus package announced by President Cyril Ramaphosa to combat the economic impact of the coronavirus. The ratings agency says this means government will continue to battle with a large debt burden.
The Democratic Alliance (DA), Congress of the People (COPE) and the Freedom Front Plus (FF+) say until there are far-reaching structural economic reforms in the country, South Africa’s credit ratings will continue to remain non-investment grade.
The parties have also cited corruption, mismanagement and skewed policies among the reasons the country’s economy will struggle to grow.
“We will only regain our investment grade credit rating when there’s proper economic reform in South Africa. We have to change government’s economic policy away from an obsession with state control and making it easier to do business with policies that are pro growth. We’ve got to get rid of zombie SOEs like SAA and Eskom and stop giving them bailouts every year,” says DA’s Geordin Hill-Lewis.
SABC News reporter Manelisi Dubase reports further on this story in the video below:
Government has released a statement, noting Standard and Poor’s decision.
Treasury says government will next month release a special adjustments budget that will outline a range of economic reform proposals and measures to stabilise public finances amidst battling the coronavirus pandemic.
In March, Moody’s downgraded South Africa’s sovereign credit rating to “junk” status.
The ratings firm downgraded the rating one notch to ‘Ba1’ from ‘Baa3’ and maintained a negative outlook, meaning another downgrade could follow if the economy performs worse or government debt rises faster than expected.
South Africa’s Finance Ministry, at the time, said the downgrade would add to prevailing financial market stress.
Moody’s said the main driver behind the downgrade was “the continuing deterioration in fiscal strength and structurally very weak growth”.
“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will exacerbate the South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses,” it added.