South Africa’s investment grade rating still vulnerable
Standard & Poor’s decision to maintain South Africa’s investment grade credit rating has taken some pressure off President Jacob Zuma ahead of elections in August, although analysts said the country is still vulnerable to a downgrade to “junk” status.
S&P kept its negative outlook on South Africa’s BBB- rating after a review on Friday, warning a downgrade to “junk” status could be on the cards later this year, or the next if policy measures did not turn around an ailing economy expected to grow by 0.9 percent at most in 2016.
Zuma, in a statement on Saturday, said the S&P review was the result of “the sterling work that has been done over the last few months to turn our economy around”.
“The decision … which follows on the footsteps of yet another encouraging decision by Moody’s demonstrates that working together we can reignite our economy, attract investment and create jobs for our people,” he added.
S&P, Moody’s and peer Fitch, whose own review is expected in the next few days, have all warned of possible cuts to South Africa’s credit standing after Zuma rattled investors by changing finance ministers twice in less than a week in December.
Analysts said S&P’s decision, which came after Moody’s also held its Baa2 rating on Pretoria last month, was a nod to extensive firefighting efforts by Finance Minister Pravin Gordhan, reappointed in December to calm jittery markets after a previous stint in 2009-2014.
But they also said any policy slip-ups or political rhetoric that backs the rising speculation that Gordhan does not enjoy Zuma’s full support, could induce a downgrade by year-end.
“We still firmly believe that South Africa’s propensity to make policy mistakes, the lack of key reforms, and uncertainty in the economy mean that we are on a near inevitable path towards sub-investment grade,” Nomura analyst Peter Attard Montalto said.
“The politics just don’t allow National Treasury the space to be ‘good’ at growth-boosting reforms.”
Zuma has faced increasing opposition accusations of mismanaging the country ahead of key local government elections on Aug. 3.
He survived an April impeachment vote called by the opposition after the Constitutional Court said he breached the law by ignoring an order to repay state funds spent on renovating his home.
For Citizen TV updates
Join @citizentvke Telegram channel
Video Of The Day: | TALES OF LAMU | Island grappling with an acute shortage of fresh water