S&P Global Ratings left South Africa’s foreign-currency and local-currency credit ratings unchanged on Friday, citing weak economic growth and arising debt burden as reasons for keeping the country in “junk”status.
South African President Cyril Ramaphosa has been at pains to rekindle growth and win over foreign investors since taking office in February.
But he has been hampered by infighting in the ruling African National Congress (ANC) and severe fiscal constraints after a decade of stagnation marred by policy uncertainty and corruption scandals.
“Anaemic economic growth in 2018 and sizable contingent liabilities continue to weigh on South Africa’s fiscal prospects and debt burden,” S&P said in a statement.
“Nevertheless, the new government is pursuing a series of economic reforms that should help boost the economy from 2019onward, despite structural impediments, chronic skills shortages and high unemployment.”
S&P kept South Africa’s long-term foreign-currency rating at ‘BB’, while the long-term local-currency rating stayed at ‘BB+’. The ratings have a “stable” outlook.
The finance ministry said S&P’s ratings decision gave the country “a chance to demonstrate further concrete implementation of measures that are aimed at turning around the growth trajectory”.
S&P downgraded South Africa last year following a sharp deterioration in the country’s public finances under former president Jacob Zuma.
Commenting on ANC plans to change the constitution to allow for land expropriation without compensation, S&P said on Friday that it expected “the rule of law and enforcement of contracts will largely remain in place and will not significantly hamper investment levels in South Africa”.
It added that it could lower its ratings if it observed a continued fiscal deterioration, or if the rule of law or property rights were to weaken significantly.
The ratings could be raised if economic growth or fiscal outcomes strengthened in a sustained manner.
Media Statement Government Response to S&P’s 2018 Rating Action (Text)